What can you do with a Home Equity Loan?
Homeownership comes with its share of hassles. repairs, lawn care, and the monthly payment. Ofcourse, having a place of your own is full of positives, including tax breaks and lower crime. Not to mention, it’s truly yours.
There’s just something about being able to paint a room any color you like. Probably the top benefit of them all? Equity.
What Is Equity and How Does It Work?
Basically, you build equity in a home when its value is higher than the amount you still owe on the mortgage. For example, say your house is worth $200,000 and the remaining balance of your mortgageis $160,000. You have $40,000 in equity.
While this might seem like a guaranteed outcome of home ownership, that isn’t always the case. With so many factors impacting a home’s value, just making your regular payments doesn’t equal building equity.The housing market could dip and the value of your home could go down with it.
You can get a rough idea of your home’s value based on how much comparable houses in your area sell for. But that’s only an estimate. The only way to know the true value is an official appraisal by a certifiedprofessional. If the value they determine is significantly higher than what you owe, some options are available to you.
Making Equity Work For You
There are a few ways you can tap into your home’s equity, and each has its own pros and cons. Here atLincoln Park Community Credit Union, we offer Home Equity Loans through our partnership with Mortgage Center.
People like this option because they know exactly what they’re getting into right from the start. Being a homeowner means surprises aren’t usually a good thing and there aren’t many surprises when you have fixed rates and set monthly payments with a home equity loan.
While those details are well-established, you have several different options for what you can do with those funds.
Equity Building Equity
A popular purpose for home equity loans is a significant renovation project. Finally getting that dream kitchen or extra bathroom not only helps you love that house even more, but it could also actually increase the overall value. You’re using your current equity to build up future potential equity.
With the ever-rising cost of college, it might make sense to use your home equity to help pay for yourchild’s education. Of course, you want to weigh this against all other options such as student loans, grants, and scholarships.
Put It Together
Consolidating high-interest debt is another option. The rate on your home equity loan is probably going to be significantly lower than the average credit card or personal loan.
You could save quite a bit by paying off those cards at one time. Just make sure you don’t end up running up those balances again.
Even though you may love your home, sometimes you just need to get away from it all. How about a long cruise in the Caribbean? Maybe a whale-watching adventure in Alaska? Perhaps you’ve always wanted to travel abroad and experience other cultures. Whatever getting away looks like for you, a home equity loan could be used for that bucket list trip.
Get Paid Back
You put a lot of time and effort into your home each year. If you’ve got equity built up, now might be a good time to let your house start paying you back. A beautiful new kitchen, relaxing vacation, or saving a lot of money could be just what you need to balance out those homeownership hassles.