In recent years, the concept of utilizing home equity has become an appealing financial strategy for many homeowners. Coming out of the holiday season often accompanies a rise in credit card debts due to festive spending, tapping into your home’s equity could be a viable solution to manage these financial hurdles. As of 2023, the average homeowner’s equity is well over $200,000., making this strategy even more attractive.

Two popular methods to access home equity are Home Equity Line of Credit (HELOC) and Cash-Out Refinance. Both options have their own set of benefits and considerations.

A Home Equity Line of Credit (HELOC) operates similarly to a credit card, where you are granted a line of credit based on the equity of your home which you can draw from over a period of time. This option provides flexibility and is ideal for individuals who have ongoing expenses or prefer to have a safety net of available funds. The interest rates on HELOCs are typically variable, which could be a consideration depending on market conditions.

On the other hand, a Cash-Out Refinance involves refinancing your existing mortgage for a higher amount than what you owe, and the difference is given to you in cash. This option is suitable for individuals who have a significant expense or investment on the horizon. It often comes with a fixed interest rate, providing predictability in payments. However, it’s crucial to note that this option may extend the term of your mortgage, potentially at a higher interest rate.

Sometimes spending, during the holidays or otherwise, can be burdensome. With credit card interest rates constantly increasing, leveraging your home’s equity to pay off high-interest debts could be a financially savvy move. This not only alleviates the stress of accruing interest but also provides an opportunity to consolidate debts into a more manageable payment structure. In conclusion, the increased equity that homeowners have witnessed in 2023 provides a beneficial avenue to manage financial obligations, especially post-holiday debts. Whether opting for a HELOC or a Cash-Out Refinance, it’s imperative to consult with a mortgage broker to understand the implications fully and choose a path that aligns with your financial goals. As you navigate through your options, embracing the equity in your home could pave the way for a financially serene start to the new year.