How to Make Your Home Equity Work for You
Did you know you can take out a home equity loan or line of credit to finance for things other than home improvement projects? If you’re looking for a way to pay for your child’s college education or other expenses like a wedding, then a home equity loan or line of credit may be the answer. Here are the most popular ways to make the equity in your home work for you.
The most obvious way to use the equity in your home is to finance an upgrade. Many improvements can dramatically add value, sometimes even exceeding the cost of the improvements over time. Plus, they add to the quality of life. Here’s a list of the top ten of the top home improvements that will add value to your home and the percentage of the cost you can recoup when you sell your home.
Another great thing you can do with a home equity loan is use it to consolidate your debt into one lower payment. For example, if you had $25,000 in credit card debt, and were paying the $500 minimum payment at an interest rate of 14.5%, it would take you 78 months, that’s six and a half years, to pay it off in full. Or you could take out a home equity loan at a lower rate, and pay it off much earlier. Usually home equity loans have lower rates than credit cards which can lead to a lower monthly payment. In addition, the interest paid on a home equity is tax deductible in certain cases. Consult your tax advisor for any possible tax deductions.
In the 2009-2010 school year, the average cost for tuition, room, and board was estimated to be more than $21,000 a year. That’s about $84,000 for a four-year education and the cost only seems to be going up! Coming up with that kind of money can be daunting and stressful, but you can tap into the equity in your home to finance a college education. Many parents looking to send a child or children, or themselves to college turn to a home equity credit line.
Important Life Goals & Events
Many people tap into the equity of their home to finance some of their important life goals and events, including weddings, a dream vacation, buying a vehicle or other high ticket items like medical expenses.
Finally, a major benefit of a home equity credit line is that it provides a “safety net” for a family. Most lines of credit allow access to funds during the draw period, which is usually the first ten years, but do not require any funds to be drawn. That means if there is an unexpected need or opportunity, there are funds available to you IF you need them, with little or no cost until you need them. For more information on how a home equity line of credit or loan works, check out my previous post.
Rates are at Historic Lows
It’s no secret that rates for lending products like home equity loans and lines of credit are near historic lows. NOW is the time to see if any of the available home lending solutions might be right for you. From March 12-17th 2012, Webster is putting the spotlight on the needs of all customers who are homeowners and is offering a FREE HOMEOWNERS REVIEW. Please call your local Webster branch or stop by and see a trusted banker to discuss your options.
Getting the most value and enjoyment out of your home can happen if you know all your options and plan for them. Let us know any questions you may have about how home equity loans and lines work in the comments below.