Should You Leverage Your Home's Equity to Buy More Property?
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Should You Leverage Your Home's Equity to Buy More Property?

Have you ever considered leveraging your home's equity to buy another property? With housing prices rising over the past few years, it might be tempting to cash out your equity and put it towards another down payment. But is it really worth it? Clients always ask Maggie and the team about refinancing options, so we're here to break it down a bit further for you. Let's take a closer look.
The Pros of Leveraging Your Equity Through Refinancing
There are some definite advantages to leveraging your home equity and
refinancing to buy more property. First of all, you'll likely get a lower interest rate than if you were taking out a traditional mortgage. That's because home equity loans are usually much cheaper than unsecured loans. Additionally, the interest on your home equity loan may be tax deductible—meaning you could potentially save even more money in the long run.
Although we're dealing with
some of the highest interest rates we've seen in decades, clients are still happily refinancing lower-rate traditional mortgages for cash-out refinancing opportunities (in some cases, trading 4.5% interest rates for upwards of 8%). Doing so enables them to be more flexible with their home equity.
Capturing that equity allows for a wide variety of possibilities, including purchasing other properties, paying off debts, or making home improvements that can appreciate the value of their home. At the end of the day, it's about what you can do with that investment and what monthly payment you are comfortable with, not always about the interest rate itself.
The Cons of Leveraging Your Equity
Before you go ahead and cash out your equity, there are a few things to keep in mind. First of all, you'll be starting from scratch in terms of building up equity in your property all over again. It could take years to get back to where you started, and in the meantime, you'll be paying interest on the loan. If property values drop, you could also end up owing more than your home is worth — leaving you "underwater" on your mortgage.
Other cons to consider include the fees associated with taking out a home equity loan or line of credit. These can include appraisal fees, origination fees, and closing costs—all of which can add up quickly. If you're not careful, it's easy to get in over your head with a home equity loan, but that isn't a problem if you do your research, prepare accordingly, and work with professionals who have your best interests in mind.
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So should you leverage your home equity to buy another property?
Ultimately, that decision comes down to your personal circumstances and goals. If you're comfortable with the risks and feel confident that you can manage your finances responsibly, it could be a great way to grow your real estate portfolio and increase your net worth. However, if you're not sure you can handle the extra debt load, it might be better to play it safe and stick with your current home and financing arrangement.
Talk to your financial advisor or
reach out to Maggie and our team of expert mortgage and refinancing professionals to see what makes the most sense for you.
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