Are you hoping to make improvements to your New York home in 2023? If so, did you know you may be able to tap into your home equity to fund those improvements? Equity is the difference between what you still owe on your home and its current value. That equity can be a powerful financial tool to help you achieve your real estate goals, including remodeling to increase your home’s value. Let’s examine the pros and cons of using equity to pay for those upgrades and how you can get the biggest bang for your buck.
Benefits of using equity to upgrade your home
There are many ways that your home equity can be used, but one of the most common ways is to pay for renovations. The benefits of using equity to upgrade your home include:
- Lower interest rates – You’ll pay less interest for a home equity loan because they typically have lower interest rates than other types of loans or credit cards.
- Fixed interest rates – Home equity loans also have fixed rates and you receive the money in a lump sum. This is an important benefit as interest rates are expected to continue to increase this year.
- Tax deductions – The interest you do accrue on your home equity loan can be deducted from your taxes if the money is used to improve your home.
- Increase your home value – Many improvements you make can increase the value of your home which will benefit you when it’s time to sell down the line.
- Upgrade your lifestyle – The improvements you make will not only increase the value of your home, but they can also improve your quality of life.
Risks of using equity to upgrade your home
While there are many benefits to using your equity to upgrade your home, it doesn’t come without some risks. Those risks can include:
- Housing prices dropping – While the value of New York homes has increased substantially over the last couple of years, it won’t continue at this rate forever. If housing prices plunge, then your improvements may not bring the increase in value you had hoped for.
- Tax deduction limits – While you can deduct the interest on your home equity loan, there are limits. Watch your spending so that you can take full advantage of the deductions that are currently offered.
- Foreclosure – If for some reason you are no longer able to make payments on your loan, then you could face foreclosure and lose your home.
Using equity responsibly
Home equity is an excellent way to make upgrades to your New York home, but not all upgrades were created equal. Focus your renovations on expensive one-time projects such as replacing your roof. Research which renovations provide the biggest return on investment when it’s time to sell so that you’re using your equity wisely. And remember that you don’t need to take out the full amount offered to you. Use just what you’ll need to make the renovations and resist the temptation to use your home equity for frivolous expenses such as a luxury vacation.
Contact Keller New York today
Are you ready to become a New York homeowner so you can start building home equity? Then contact the Keller New York Bronx office at 718-697-6800 or the Eastchester – Scarsdale office at 914-713-3270. Our team has expert knowledge of New York real estate and can help you reach your homebuying resolutions. Contact us today!