Dorothy was right: there’s no place like home, and she didn’t even know about all of the advantages your home may bring you. In fact, the equity in your home can be an untapped source of funds. And, with interest rates still low, homeowners continue to view home equity as a very attractive way to borrow money and consolidate debt. So, if you own your home and could use the extra money, now may be the ideal time to put the equity in your home to work for you.
Home improvement and debt consolidation remain the top uses for home equity loans. Whether you’re adding on a new family room, putting in a pool, or consolidating high-interest credit card debt, a low interest, tax-advantaged home equity loan or line of credit may make economic sense.
No Home is the Same, No Loan is the Same
Using your home as collateral for any loan is a very serious matter. Before pursuing a home equity loan, carefully evaluate your ability to repay. For small or low priority purchases, a home equity loan isn’t likely to be the best option. If you decide to take advantage of a home equity loan, a lender can help you choose the type of home equity loan that’s right for you. In fact, you may be able to borrow up to 100 percent of your home’s value.
Home equity loans come in two varieties: fixed rate loans and lines of credit. A fixed rate home equity loan is the traditional second mortgage. The interest rate on this loan doesn’t change, so it provides a set monthly payment for a specific length of time—and specific terms for repayment. A line of credit typically has a variable interest rate and can offer greater flexibility because you can access the available funds on your line when you need it without going through an additional application process. When you pay the line back, those funds are there for you to use again.
Get What You Need…Even Some Peace of Mind
Using the equity in your home can be a disciplined form of borrowing—if you carefully evaluate the options and make informed decisions. Whether you’re financing a college education, building an addition to your home, or consolidating debt, the current low interest rates and potential tax benefits may make a home equity loan an appealing option. Consult your financial institution for more information. TPW