Buying a house is not easy, there is a lot of investment to take care of – down payment on a mortgage loan, closing costs, and more. That leaves you wondering if you are looking for houses to buy in Denver, where do you get the initial expenses from? One way that homeowners get around the problem is by cashing in on home equity.
In this post, we will go through all the details of home equity, starting from the meaning of the term to how it can help you buy a house in Denver, Colorado.
What is Home Equity?
The concept of home equity is not difficult to understand. It is the difference in the market value of your property and the outstanding balance on your mortgage loan. For example, if the market value of your home is $500k and the outstanding mortgage loan is $300k, your home equity is $200k.
How can home equity increase over the years? One is by making mortgage payments thereby decreasing the quantum of outstanding home loans. The other happens when say, the average house price increases, thereby pushing up the market value of your home. When you search Denver homes, more equity means you have wider choices to find a house that matches your needs.
How Can Home Equity Help You Afford Your Dream Home?
If you need houses to buy in Denver or upgrade your existing home, there are several ways that home equity can help you finance your dream.
1. Use Home Equity to Make a Larger Down Payment
One way to save thousands of dollars during the tenure of your mortgage loan is to make a large downpayment. Not only does it mean a smaller amount of loan but a lower interest rate too, all of which adds up to reduced monthly mortgage payments. Further, a larger down payment helps you to avoid private mortgage insurance (PMI) which alone can save hundreds of dollars every month.
All these factors will mean that you can afford to look for properties that have a higher average house price in Denver as your monthly payments will be low.
2. Use Home Equity to Buy a Second Home or Investment Property
If you’re interested in buying a second home or investment property in Denver, you can use your home equity to help finance the purchase. For example, you can take out a home equity loan or line of credit to help fund the down payment on your second home or investment property.
Using your home equity to buy a second home or investment property can be a great way to diversify your investments and generate passive income. However, it’s important to remember that this strategy comes with risks, and you should carefully consider your financial situation before taking on additional debt.
3. Use Home Equity to Renovate Your Current Home
Do you want to upgrade your existing home or carry out large-scale repairs and renovations? It is a great way to increase your average house price in Denver and its curb value while making it more liveable and comfortable.
However, doing so does not come cheap and it is here that you can use home equity to finance the upgrades. Going this route is a better option than to buy a house in Denver, Colorado, as it is more affordable and the renovations will make your home precisely how you want it to be. Factor in the costs of relocating and setting up a house in a new place and you will see that comparatively, using home equity for renovations is cheaper than deciding on houses to buy in Denver.
4. Use Home Equity to Fund Your Retirement
If you’re approaching retirement age and don’t have enough saved, you can use your home equity to help fund your retirement. For example, you can take out a reverse mortgage, which allows you to access your home equity without having to sell your home.
Using your home equity to fund your retirement can be a smart financial move, but it’s important to remember that this strategy comes with risks. Reverse mortgages can be expensive, and they can reduce the amount of equity you have in your home.
Home equity can be a valuable tool for homeowners in Denver who are looking to afford their dream home. Whether you’re looking to make a larger down payment, consolidate your debt, renovate, or buy a second property, home equity can help you achieve your goals. As with any major financial decision, it’s important to carefully consider your financial situation and the risks involved before tapping into your home equity. To learn more about how you can use home equity to your advantage, reach out to our team at 720-730-2289!