Guess what? We are in a rising equity market around here
and I was just wondering how many homeowners are making that equity make money
for you.
So, first, let’s define equity. It is the difference between
the amount you owe on a mortgage for real property and the amount that property
is worth.
Example:
123 ABC Street Value:
$450,000
Mortgage -Owes
: $300,000
Equity $150,000!!
How many of you have 150K sitting in the bank right now?
That is YOUR money, and it’s just sitting there in your
house. It’s not making money for you. Pull out your equity and get yourself
some financial security, create your empire!
If you cash out some or all of your equity make sure you put
it in a place that can work for you. DO NOT take that money and purchase a
boat, car, or vacation. These actions DO NOT make money for you!
However, if you have NEVER been to the beach
and you take some cash and end up in Antigua, I am not gonna hate on that.
But really, the best thing to do with your equity is to
place it somewhere it can make money!!
So, let’s talk about some of the smart things you can do with that money.
- The interest paid is tax deductible! Yes, interest payments made on a primary mortgage are tax deductible. This means if you use this cash to do some home improvements, you are not only increasing the value of your home, but you are also getting a tax deduction!
- FYI: It is important to tell you that if you are considering a HELOC, (Home Equity Line of Credit), for the purpose of pulling equity out of your house, you will not reap the tax benefits. The IRS will not allow you to deduct the interest paid on a HELOC. You will get a better rate and all of the tax benefits from a primary mortgage.
- Put that money in an interest drawing savings account, or a money market account, or invest it with a financial investor. You still get a tax deduction on the interest you will pay! If you leave this equity in your property it is doing NOTHING for you!
- Have you thought about buying an investment property? Typically some of those loans require a 20%-25% down payment. Use your equity and create another opportunity for cash flow, another equity builder, and a tax deduction!
- Are you in debt? Pay off some of your revolving and installment debt! A lot of times, the interest you PAY on those types of consumer loans will be more than what your mortgage interest is AND you DO NOT get any kind of tax benefits for making payments on a car! Not to mention the positive impact that it will have on your credit score.
- Do you have VA eligibility?? You can cash out 100% OF YOUR EQUITY!! IT'S ALL YOURS!
I am sure
there are lots of other benefits that will be unique to you but believe me, it
is still better than just letting your equity sit…and sit. Use it. Make your
money make money!
As
always, I am here to share information about the ins and outs of real estate in
the DC Metro market. If you want to comment or chat with me about mortgage and real
estate questions you can reach me at 304-582-0434 or
realtalkaboutrealestate@gmail.com.
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