As a homeowner, you may find yourself in a position where your current home no longer meets your needs, but you're unsure about the best way to leverage your equity. With a remaining mortgage balance of just $14,000 on a home now worth $450,000, the question becomes: do you sell, take out a home equity loan (HELOAN) or home equity line of credit (HELOC), and rent out your current home, or do you use the proceeds from the sale to move into a more expensive home in the $575,000 to $640,000 range?
There are several factors to consider when making this decision.
First, it's important to understand your goals and priorities.
Are you looking for more space to accommodate a growing family or changing lifestyle?
Or are you more interested in building wealth through real estate investments?
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Move into a larger, more expensive home, selling your current property
If your primary goal is to move into a larger, more expensive home, selling your current property may be the most straightforward option. By using the proceeds from the sale as a down payment, you can potentially secure a more favorable mortgage rate and lower your monthly payments on the new home. However, it's crucial to consider the current housing market conditions and interest rates, as they can significantly impact the affordability of your new mortgage.
Explore the rental market and generating passive income
On the other hand, if you're interested in exploring the rental market and generating passive income, taking out a HELOAN or HELOC to leverage your equity could be a viable option. This would allow you to purchase a new home while keeping your current property as a rental. However, being a landlord comes with its own set of responsibilities and challenges, such as finding reliable tenants, maintaining the property, and navigating potential legal issues.
Crunch the numbers and consider various scenarios
Before making a decision, it's essential to crunch the numbers and consider various scenarios. Consult with a financial advisor or real estate professional to discuss your options and determine the most financially sound course of action based on your unique circumstances. They can help you compare the costs and benefits of selling versus renting, taking into account factors such as capital gains taxes, rental income potential, property management expenses, and long-term appreciation.
Ultimately, the decision to sell or rent out your current home while moving into a more expensive one depends on your personal goals, risk tolerance, and financial situation. By carefully weighing your options and seeking expert advice, you can make an informed decision that aligns with your long-term objectives and sets you up for success in today's dynamic housing market.
