With growing inflation rates, it seems like prices will never stop rising. It brings to light a problem almost everyone is facing: how to build wealth in hidden places. One such place is not the first to come to mind—your home equity. There is value in your home, and with the right strategy, you can begin to accrue wealth over time. Kathy Brown, Director of Mortgage Sales at Traditions Bank, offers insights into how to tap into this.
First, let us go over the basics:
What is home equity?
Home equity can be understood as the current market value of your home minus what you owe.
Where does equity come from?
There are two primary ways your home equity can increase. One way is by paying down the principal balance on any loans that are collateralized by your home. The second way is an increase in the market value of your home over time.
How can you utilize your home equity?
You can borrow against your home’s value with a home equity loan or line of credit. The difference between the two is how you receive the money. A home equity loan will provide you with a lump sum all at once. This is best when you know how much you need for a specific purpose. On the other hand, a home equity line of credit (HELOC) is similar to a credit card in which you can draw cash from the available balance as needed. The latter is a more flexible option if you are looking for funds now and for the future. Both options provide lower interest rates than credit cards and allow you to access cash for things such as home improvements or big purchases.
Ultimately, you have options to access the equity in your home. Depending on your situation and long-term goals, each option offers different benefits. Our Traditions Bank lenders are here to guide you, answer your questions, and help you take the next step in accessing your home’s equity.