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04 April 2021

Top 7 Reasons Why You Should Tap into Your Home’s Equity

Home equity refers to a portion of your home that has been paid off. It is usually the difference between the total worth of your home and the amount you still owe on the mortgage. The accumulated equity in your home is one of the best ways to get the cash that you need to carry out renovations or improve your financial position. Furthermore, this money can be borrowed at a very low-interest rate, which is good news for any homeowner. Here are a few reasons why you should consider tapping into your home’s equity.

Repair, renovate, or expand your home

Most homeowners take home equity loans to cater for the high expenses associated with home improvements. Although costly, renovations, repairs, and expansion of your home can boost the value of the property and will make the place more enjoyable to live in. With a HELOAN, you will have an excellent source of money for your one-time, big projects such as the construction of an extra room, paving your driveway, or a full renovation.

Repair, renovate, or expand your home

Most homeowners take home equity loans to cater for the high expenses associated with home improvements. Although costly, renovations, repairs, and expansion of your home can boost the value of the property and will make the place more enjoyable to live in. With a HELOAN, you will have an excellent source of money for your one-time, big projects such as the construction of an extra room, paving your driveway, or a full renovation.

Debt consolidation

Homeowners can use their home equity loan to consolidate high-interest debts while enjoying lower interest rates. This loan can be used to settle other personal debts like credit cards and car loans. This will significantly lower your monthly expenses because you will pay lower interest rates and get a longer payment term. However, be sure to budget carefully for your HELOAN since a default or late payment on the loan can result in credit problems or the loss of your property. It is best to consult a professional to craft a plan for managing your expenses before you consolidate your debts.

College tuition and expenses

Using HELOAN can be an excellent way of funding college tuition and can also cover any incidental college expenses. The main benefit is the lower interest rates you get from home equity loans compared to student loans. If you wish to fund your children’s education with your equity, you need to calculate the monthly expenses and your ability to pay off the debt before retirement. You should not carry debt for your kids when you are living on a limited income. Be sure to look at the options before deciding because a default on the home equity loan may lead to the loss of your home.

Emergency expenses

Financial experts recommend that people should have an emergency fund that covers at least 3 to 6 months of their living expenses to cater for any crisis situation that may arise. In most cases, emergency funds may not cover all your expenses during a crisis, especially when you have incurred costly medical bills or have lost your job. In such instances, the best way to supplement your emergency fund is by taking a home equity loan.

Make a big purchase

A home equity loan can be a good way of financing your big purchases like a new car, your wedding, or an extravagant vacation or honeymoon. However, you must be cautious when using your house as collateral for the HELOAN. With extensive research, you may get other loan options that are better off and will not put your property at risk.

Business expenses

Some business owners can take a home equity loan to help boost their business. If you need more capital to grow the business, you can save cash on interest by considering taking a HELOAN instead of a business loan. You must ensure that your services or products are in high demand in the market and your profits can cater for the loan repayments.

Long-term investments

A HELOAN can also be used to invest in real estate or the stock market. However, you need to consider the risks involved because the stock market has no guarantees. Additionally, you are not sure that the real estate property you invest in will bring more income or lose its value for you to get a return on your investment.

One of the most valuable and largest assets that you have as a homeowner is your home equity. Always remember that your home equity is yours and you can use it whenever you are in need. This is one of the best ways of getting a large amount of money at a lower interest rate. Before you take a HELOAN, be sure to consult financial advisors that you trust to help you make good financial decisions.