Smart Ways to Use Your Naples Home Equity

As home prices continue their march onward, many Naples homeowners see an increase in their home equity. That’s the difference between what you owe on your mortgage and the current value of your property. Some homeowners use this equity when they sell in order to boost their downpayment on a new home. Others want to tap into that equity before they sell. But not all uses of equity are equal. Here are a few ways to use your home equity wisely.

Do you have equity in your Naples house that you want to spend? There are some smart uses for your home equity that would actually benefit you.

Smart Uses for Your Home Equity

Home Improvement Projects That Add Value to Your Property

Search homes for sale in the Naples/Marco Island areaIt might be time to make some changes to your Naples home. Using your equity to do so can be a smart use of funds. Replacing outdated appliances or adding energy-efficient and smart home features are great ideas. Something as simple as replacing the garage door offers the best return on investment. Installing solar panels actually pay for themselves over time. But if you dream of adding a pool to increase your home’s value, beware. The cost to install a swimming pool is far greater than any value it might add to your property. If you’re in doubt as to whether a home improvement project will increase or lower your home’s value, talk to your real estate agent first.

Debt Consolidation

Trying to pay down your high-interest credit card debt? Using some of the equity in your Naples home might be beneficial. Of course, that depends on why you carry a lot of credit card debt. Did your credit card usage skyrocket during college? While temporarily unemployed? Have you decided to change your out-of-control ways by creating a budget? You still need to pay your current debt load down. Depending on your credit score, you could save 10% or more in interest. That helps pay down your debt faster. But, if you don’t have any intention of changing your spending habits, it would be a bad idea to use your equity to consolidate your debt. You could fall further into debt very easily.

Create an Emergency Fund

Financial experts suggest that you keep enough money in an emergency fund to handle at least six months of your living expenses. That includes mortgage, utilities, insurance, health care, food, etc. You never know when an emergency may hit your household. So, you need to be prepared. The money also should be easy to access. Instead of maxing out your credit cards to get you through a tough time, apply for a HELOC (Home Equity Line of Credit). If you do so now when you don’t necessarily need it, it will be there when you need it most.

Invest in Real Estate

Finally, another smart way to utilize the equity in your Naples home may be to invest in another property. This also comes with risk. But it also potentially brings in more money as well. Talk to your financial adviser to see if this is a risk worth taking.

Michelle Thomas, Premier Sotheby’s International Realty, Luxury Naples/Marco Island Homes & Condos