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Once you own your home, you can start building equity. The equity in your home can be tapped in various ways, but of course this means that you’re further away from owning it outright. However, depending on your future plans, getting the cash out sooner rather than later may make the most sense for your financial future. Keep reading for beneficial financial tips & tricks that every homeowner should consider.
Making Money On Your Home
If you have a home office, you can be making money out of your home. If you have a private egress and can set up a small apartment or studio, you can be making money on your home. The world of vacation rentals and shared spaces is changing rapidly. As the culture moves toward decluttering and minimalism, you may actually find that you have more space than you need and are ready for a roommate or for temporary borders to stay in your home.
Be aware that it will take work to prepare your space for a vacation visitor as a VRBO or similar host. However, if you can get good and consistent ratings, you can pick and choose who stays and on what days. Depending on your home layout and your region, being a vacation host can be quite lucrative due to the amount of flexibility it offers.
What Is Your Home?
Is your home an investment? There are many opinions in the ether about whether or not your home is an asset, a liability, an investment at the moment, or an investment in the future. This decision is actually highly personal. We all have to live somewhere. If you are only planning on being in a certain region for a short time, then the act of buying a home, with all the fees and required savings, may not be the best use of your dollars.
However, if the conditions are right and you plan to stay in place for a time, then buying a home and building equity quickly is a good choice. You can pull money out of the house as needed, either by selling it and looking for another or with a cash out refinance option. This can be a very beneficial option.
The Many Ways of Looking at Debt
If you have equity in your home and are in need of cash, getting a new mortgage and a cash-out check can help get a handle on high interest rates and excessive monthly payments. Before you take this step, understand that it will lengthen the time you have to spend paying off your house. There are passive income options you can make that can help. To get the best value from a cash-out, start a spreadsheet and list
- who you owe
- the total amount you owe them
- the minimum payment each month
- the interest rate on the debt
There are three ways to think about how to reduce your debt with a cash-out:
1) Debt snowball: Sort your debt by the total amount owed, from smallest to largest. Pay the minimum on everything but the smallest debt and hit that as hard as possible. When it’s gone, roll that payment onto the next smallest debt.
2) Debt avalanche: Sort your debt by interest rate, from smallest to largest. Follow the steps above to wipe out high interest rate debt first.
3) Do a Value Check: Sort your debt by minimum monthly payment from largest to smallest. Wipe out the debts that cost you the most each month to lower your total monthly burden.
Looking Long Term
Be certain to also take a look at your house. Do you plan to retire and age in place in this house? If so, make sure that the bedrooms and the laundry are on the same floor. Make sure you can sleep and take a shower on the main floor if you take a tumble and need to be on crutches for a time. These are all basic necessities that will make yours and your spouse’s life a a whole lot easier. This way if there are any medical or health issues, you can move around your house with ease still. You will also not need to go up or down any stairs which can be difficult for anyone who has an injury or health condition. Make sure that you can get a wheelchair into at least one bathroom on the main floor. If this isn’t possible, you may be better off down-sizing to a more senior-friendly house instead of doing a cash-out.
Conclusion for Financial Tips & Tricks
Every homeowner and borrower has a different set of needs and goals. No one advisor or lender can give everyone exactly what they need. Looking into financial tips and tricks as a homeowner can help benefit you and your family. Make sure you do enough research to know what you are doing and to make a solid plan. Doing an equity cash-out to better manage debt can reduce the interest you pay and improve your credit score.