If you’re a homeowner, your home equity can be a strong financial tool. Home equity is the difference between your home’s market value and what you owe on your mortgage. As your home value rises or your mortgage balance drops, your equity builds. Here’s how to use it wisely.
Renovate with purpose
Tapping into your equity to renovate can increase your home’s value. Focus on updates that improve function—think kitchens, bathrooms, and energy efficiency. Avoid trendy finishes that won’t age well.
Consolidate high-interest debt
If you’re paying down credit cards or personal loans, using your home equity through a HELOC (Home Equity Line of Credit) or refinancing might lower your interest rate. That can save money and simplify your payments.
Invest in another property
Some use equity as a down payment on a rental or vacation property. It’s a long-term move and not without risk, but for some, it helps build wealth through real estate.
Help your kids buy a home
With housing costs where they are, many first-time buyers need help. You might use some of your equity to offer a gift or loan to a child who’s ready to buy. Just be clear on the financial and legal implications.
Plan for retirement
You might not need a big house forever. Some homeowners sell, downsize, and use the profit from built-up equity to fund retirement or pay off debts.
Use equity with a plan
Home equity isn’t free money. If you borrow against it, you’re increasing your debt. That’s fine if it fits your goals and you’ve looked at the risks. Talk to a mortgage advisor or financial planner before making any decisions.
Making the most of your home equity means thinking long-term. Use it to improve your financial position, not just to access cash.
