What brought this blog on is that I had a lady call me not too long ago asking me what I meant by equity in my video above? She actually had no idea what equity was, what it meant to her, what it could be doing for her so I happily broke it down so she had a good understanding of the importance of equity.
If you’re unaware of what Equity is, I’ll quickly explain. When you purchase a home you’re likely carrying a decent mortgage on the property, minus your initial downpayment that you put down (generally 20%). Over time you’ve been paying down your mortgage and your home has likely also gone up in value (especially if you’ve been taking care of your investment)
So for example and let’s say for easy math you put $100K down on a $500K property, in the last 5 years you have paid off $100K in your mortgage and your place went up $150K in value. So if you look at what the value of your property is currently, along with what you have already paid off, you’re already carrying roughly $350K in home equity.
Are you with me so far? Great! So this is where it gets crazy important and potentially life changing for you. So if you’re already a home owner but haven’t been following the current 2020-2021 market, were you aware that home prices have gone up as much as 35% in some areas in the last year alone?
Were you aware you were potentially sitting on a mountain of equity that is currently doing nothing for you? The current market is hot and the rates are historically low. I can promise you won’t get many windows like this to make a move and capitalize on it.
So here are a few things you can do to protect yourself and play safe or roll the dice and increase your real estate portfolio and build your personal wealth.
Did you know you can use up to 80% of your homes’ current value? There are a few things you can do currently to set yourself up to get in a better financial position. You can
- increase your mortgage and pay off higher percentage debts such as credit cards
- you can use your equity get a line of credit for a rainy day, behind your mortgage. It can be used as a life line in case something unfortunate happens.
- Lastly and most importantly, you can use the 80% as equity for a down payment on a rental building and you can start adding to your real estate portfolio and start building equity. If you become dedicated to a plan like this you can make it that by the time you retire you could potentially own 3-4 properties that are now paying you.
So if you want to discuss what your options are, give me a call and we can have a quick discussion on how and where we can build your real estate dreams.
As they say, “If you don’t sacrifice for your dreams, ultimately your dreams will become the sacrifice” - think about that.