Best Ways to Tap Your Home Equity for Investing
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Sell a share of your equity
Cash out with a mortgage refinance
Open a HELOC
Pros and cons of using home equity to invest
- Can help you diversify a real estate heavy portfolio
- Relatively low cost leveraging of your assets
- Easier to qualify for a large amount to fund larger investments.
- Removes cash flow risk by accessing equity for another investment, such as another property, without increasing monthly payments (if you use shared equity)
- Allows you to use your home equity to put a down payment on a property that generates income.
- You need to yield a higher return than the interest expense associated with the home equity financing to make a profit
- You don’t earn on the appreciation of the equity you take out, if you sell a slice of your equity. So you risk earning less with your investments than your real estate appreciation
- Risk of losing your home if you are unable to repay the loan as scheduled
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