Home Value Rising? Put the Equity to Good Use

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With the current housing market recovering to levels that existed prior to the housing market crash in 2007, depending on when you purchased your home, you may find yourself with extra equity in your home that you have never seen previously.  Since interest-only mortgages have been out of the picture and homeowners were able to get into a 30 year mortgages again, at least now having a chance to pay down the principal balance.  While it may not seem like a lot goes to principal, at least it slowly pays down, and now that home values are increasing, the difference between the home value and the remaining mortgage balance is growing, giving equity in your home.  Although you will want to make sure you at least stay under 80% loan-to-value in order to avoid mortgage insurance, there are plenty of ways to take cash out of the equity in your home for good use.

Pay Off Credit Cards

Paying off high-interest credit cards and staying out of debt is first priority, so if you have any credit card balance, you could take cash out to pay off.  Mortgage rates are significantly less than credit cards, so rolling into your mortgage can be huge saving each month.  Also, it puts you at ease that you are credit card debt free; just do not go on a spending spree once they are paid off.

Invest, Invest, Invest

Too often people take a cash windfall and squander on meaningless things that depreciate in value. Instead, consider taking the money and investing into the stock market! The naysayers have long been talking about the inevitable decline in the market, but the truth is that nobody is really sure. We do know that investing for the long term is recommended by just about every finance guru out there.

Time for Home Improvements

If you have always planned to remodel the bathroom, kitchen, or finish the basement, now may be a good time to start these projects, tapping into your equity to complete, while still increasing the value of your home with the improvements.  No matter if you have always wanted to do the improvements, or fixing to sell in the future, you should still see the return on your investment, provided you do not go overboard on materials.  Adding landscaping, flowers, or putting a fresh coat of paint on the exterior can give an instant curb appeal upgrade.

Refinance to a Lower Rate

If you have not been able to refinance in the past due to owing more than your home was worth, now may be a good time to get into a lower rate.  With current interest rates still at historic lows, getting out of your 4%+ mortgage rate and into a lower rate could save plenty of money each month in just interest savings.  You could also refinance into an even lower rate with a 15-year mortgage, and pay off even sooner.

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