6 Ways to Use Your Old Home to Your Benefit
Most people sell their current home before they move into a new one, but it’s important to thoroughly consider all of your options before making that decision. No matter how long you’ve owned your home, you’ve worked hard to build up home equity and you deserve to reap the benefits of those efforts. Learn more about your options and decide which path is right for you.
1. Using Equity as a Down Payment
This is probably the most traditional way to use your home in a way that benefits your family. For instance, if you currently have $100,000 equity in your home, that will make a large down payment on your next one. This also means you’ll have lower monthly payments on a $350,000 home. A higher down payment could also allow you to qualify for a more expensive home. The choice is yours.
2. Using Equity to Purchase Your New Home Outright
If you’re thinking about downsizing, you might even have enough equity in your current home to fully cover the costs of your new one. This is the perfect choice for retirees who want to avoid taking on a new mortgage. You’ll only have to pay your annual property taxes and homeowners’ insurance. With a smaller new home built with the latest energy-saving technology, you’ll save on utility costs as well. By significantly reducing your monthly payments in this way, you’ll make your retirement more comfortable.
3. Using Equity for Retirement or Fun
Maybe you want to use some of that equity money to live a little. After selling your home, and purchasing your new one using either equity or savings, you may have some left over. You could use it to make your mortgage more affordable by applying it to the loan, but you can also use the money to increase your investments or to take that big trip you’ve been dreaming about. You might use it to purchase new furniture. Don’t feel guilty about spending some of your equity on fun things.
4. Flipping It for a Higher Price
Real estate prices have increased over the years and you may be able to sell your home for more than you paid for it. To get the most money for your home, make sure there are no unfinished projects. A small bathroom remodel or replacing a worn roof can increase your home’s value. This is especially true if there are parts of your home that look a bit run-down or dated. However, you have to think carefully about how you spend your money. You rarely get all of the money you put into renovations back, so you have to choose projects wisely. A quality real estate agent can suggest the best ways to get the most bang for your buck.
5. Earning Rental Income
Of course, you don’t have to sell your home at all. A smaller home in a great location can be the perfect rental for a young family or a couple of college students looking for a place for a few years. The money they pay in rent can go towards that home’s mortgage payment, but if you’ve already paid it off, you’ll be making a profit. This solution works well for those who haven’t built up a lot of equity in the current home. You don’t want to lose money on the sale, so you use this option to continue building up equity while living in a home that better suits your needs.
6. Giving Your Adult Children a Better Start in Life
Young adults often struggle to make ends meet, and rental costs often eat up a large part of the budget. If you’re able to pass on your home to your adult children, you’ll allow them to get off to a great start. Without the stress of paying for housing, they can easily go to college for a higher degree, afford the cost of childcare to advance their careers, or simply build up a solid nest egg to use as they wish. If you can afford to pass your old home on to your children, they’ll thank you.
Your old home has served you well for the time you’ve lived in it, but it can also serve you well when it’s time to move on. A lender who’s familiar with the new construction process can help you figure out the best way to use your home to your advantage while getting you into the home of your dreams. As you compare your choices, one will likely emerge as a clear winner.
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