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There’s no place like home: 5 ways to optimize your biggest investment

Understanding your home equity.
Photo by Patrick Albright Patrick Albright

Your home is more than just a place to hang your service cover—it’s likely one of your biggest investments. As such, it’s essential to maximize its potential to benefit your financial health and well-being. Whether you’re looking to consolidate debt, make home improvements, save up to PCS, or prepare for unexpected expenses, leveraging your home equity can be a powerful tool.

Let’s explore five ways to optimize your home investment and make the most of your equity.

1. Understanding Your Home Equity

Before diving into how to use your home equity, it’s crucial to understand what it is and how much you have. Home equity is the difference between your home’s market value and the amount you owe on your mortgage. You can calculate it by subtracting your outstanding mortgage balance from your home’s current market value. Online tools or speaking with a real estate professional can help you determine this figure accurately.

2. Building Equity in Your Home

Building equity in your home is akin to growing your financial assets and planning for your future. Several strategies can help increase your equity over time:

  • Regular Mortgage Payments: Making consistent mortgage payments reduces your loan balance, increasing your equity.
  • Home Appreciation: Property values tend to increase over time, boosting your home’s equity passively.
  • Home Improvements: Renovations and upgrades can enhance your home’s value, consequently increasing your equity.

3. Leveraging Home Equity

Once you understand your equity, you can explore various ways to leverage it:

  • Debt Consolidation: Consolidating high-interest debt into a lower-rate home equity loan can save you money on interest payments and simplify your finances. However, it’s crucial to use this option judiciously and avoid taking on additional debt.
  • Home Improvement: Investing in home renovations or upgrades not only enhances your living space but also increases your property’s value, effectively leveraging your equity.
  • Unexpected Expenses: Emergencies happen, and having access to home equity can provide a financial safety net for unforeseen large expenses, such as medical bills or major repairs.

4. Choosing Between HELOC and Fixed-Rate Equity Loan

When tapping into your home equity, you’ll encounter two primary options: Home Equity Line of Credit (HELOC) and Fixed-Rate Equity Loan. Here’s a brief comparison:

  • HELOC: Functions like a credit card with a revolving line of credit, allowing you to borrow against your equity as needed. Interest rates are typically variable, and you only pay interest on the amount you borrow.
  • Fixed-Rate Equity Loan: Provides a lump sum loan with a fixed interest rate and predictable monthly payments. This option is ideal for large expenses with a defined cost.

If you are looking for a Home Equity Loan, consider using a trusted bank or credit union like Navy Federal Credit Union. You can learn all about their Home Equity options and even crunch the numbers to find out your home equity with their handy calculator.

5. Making Informed Decisions

Before leveraging your home equity, it’s crucial to weigh the pros and cons and ensure you’re making informed decisions. Evaluate your financial situation, consider the potential risks, and consult with a financial advisor or mortgage specialist if needed. You may also want to visit the Family Readiness Center on your installation and talk with an Accredited Financial Counselor (AFC).

Optimizing your home investment starts with understanding your equity and leveraging it wisely. With careful planning and informed decisions, you can unlock the full potential of your biggest investment—there truly is no place like home.

This article was sponsored by Navy Federal Credit Union. Navy Federal Credit Union is federally insured by NCUA.