How to maximize your windfall if you sell your house and start renting

It's official — the housing market is on fire.

With mortgage rates at historic lows — for now — and a shortage of houses on the market, prices have headed skyward: The median home price rose $18,500 between March 2020 and March 2021, according to the Federal Reserve Economic Data.

It's a frustrating state of affairs if you're trying to buy a house. But if you're lucky enough to own a home already, there are ways to take advantage of the situation.

One way to capitalize is to slash your monthly mortgage payment by refinancing.

Another way? Cash in huge by selling your home and becoming a renter, even if only for a limited period of time.

The idea won't suit everyone, but if you're willing to cut down on space — and monthly housing costs — here's how you could take a big windfall and make it even bigger.

Invest wisely and strategically

No matter how long you plan on renting — a couple of years or the rest of your life — it’s always worthwhile to put your money in sound investments that have a solid history of strong returns.

If you want to strike some balance here, why not start small? Download an app that allows you to invest your “spare change.” You can always grow your portfolio as you get more comfortable with the app.

You can also ensure your portfolio continues to benefit from the hot housing market by buying into real estate investment trusts(REITs).

Or you could think about putting your money into U.S. farmland. People are always going to need to eat so investing in that valuable resource is sure to be a sound choice.

Pump up your savings

If you’re nearing retirement and can’t afford to take any risks with your assets — or maybe just the idea of that just makes you uncomfortable — you’ll want to prioritize saving.

Your best bet is either buying a certificate of deposit (CD) or putting opening a high-interest savings account.

CDs typically come in six-month, two-year or five-year terms. The longer your term, the more you’ll earn in interest.

CDs are very low risk, but the catch here is you need to leave your money with the bank for the full term otherwise you’ll miss out on accruing interest or risk an early withdrawal penalty.

If you might need your money soonee, then you’ll want to consider a high-yield savings account instead.

These accounts can earn you 10 times more than a traditional savings account, which is a great compromise for those who want to keep their money safe but earn a little extra as well.

Finally, while you’re thinking about savings, don’t forget to create a detailed retirement plan to ensure you have funds to fall back on in your golden years.

Other ways to put your windfall to good use

Anytime you come into a tidy sum, you’ll want to make a few practical money moves and at least one fun or frivolous choice.

• Pay down your debts and fix your credit score. If you’re carrying any balance on your credit cards, you’ll want to prioritize paying down debt. Not only will it lift a weight off your shoulders, it’ll give you a big credit boost — which will help when you want to lock in an affordable loan later on.

• Protect your family’s future with life insurance. Without a family home, you’ll probably be even more focused on securing your family’s financial future. Make sure they’ll be provided for if anything happens to you by buying an affordable life insurance policy.

• Treat yourself. Listen, it’s been a hard year for everyone but we know on top of everything that selling your house is a huge hassle. Why not splurge on a big-ticket item you’ve been yearning for — just make sure you’re paying the best price by downloading a free browser extension that will scour the internet for coupons or better deals every time you shop online.