“14% of millennial homeowners are poised to make a ‘flashing red light’ real-estate mistake,” as they are more likely to use their home equity on fun trips and expensive toys. As the proverb says, the “art is not in making money, but in keeping it.” When home prices rise and mortgage rates are at the lowest, tapping your home equity can be the perfect opportunity to make smart moves to increase your financial independence.
Step 1: Improve your home
Making necessary upgrades and improvements to your home thinking about how a potential future buyer will view these improvements. If the improvements are likely to be a value add for potential buyers, then do it. If not, don’t overimprove.
Step 2: Pay down debt
Another step to use your home equity smartly is to pay down high interest debt. For example, if you have a high interest credit card debt it makes sense to take a 3% mortgage debt payment over 16% or higher credit card debt.
Step 3: Bolster your investments
Finally, bolster your investment portfolio. Fixed rates on a 30 year mortgage which can be in the lower 3% can be used to obtain a return of 8% on the lower end by investing in a real estate syndication deal. RLI can help you find a deal that is right for you but that absolutely beats the lower equity mortgage loans.
Conclusion
It is the perfect time to make smart financial decisions. Save for the fun trips you want to have but it is smarter to use your existing equity to improve your home, pay down debt and increase your investments.
Work Cited
Emery, Ryan. “14% of millennial homeowners could make a big mistake with home equity.” Grow from Acorns + CNBC, 11 October 2021, https://grow.acorns.com/millennials-home-equity-mistake/. Accessed 22 February 2022.