What Are the Best Uses for Home Equity?

Today we're talking about smart uses for home equity. If you pull equity out of your home, be sure to spend it on something that appreciates or provides a return.

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Today, I wanted to talk about the importance of home equity and what you should and shouldn't do with it.

I recently read an article about what millennials are using home equity for; they're refinancing for a line of credit and using it to pay for things like a vacation or a wedding. I get all that, but I would advise against taking money out of your most important appreciating asset and spending it on something with no return.

Years ago, I met a man who used an equity line of credit to buy a new truck in cash so he wouldn't have a car payment, and he was so proud. However, remember that as soon as you drive a truck out of the showroom, you're losing money on it. Why take money out of an appreciating house and spend it on an instantly depreciating truck? It's not a good idea.

So is there a good time to use your home equity? I would say yes, for several options.

If you're upgrading your house—particularly to keep it in line with your area—that's a good use of your money. Just be careful not to overdo it. Putting a $100,000 kitchen in a $100,000 house isn't smart. Paying off high-rate credit cards is also a good use of equity.

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The best way to use home equity is to purchase investment property.

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I think the best way to use home equity is to purchase investment property. Becoming a real estate investor is a perfect way to reinvest a home equity line of credit into something that will make you more money.

If you have any questions about smart uses for home equity or you're interested in learning more about property investing, give me a call or send me an email. I'd be happy to help you out.