Sometimes emergencies happen, which means you might be considering all options for getting a loan to get something taken care of. A home equity loan can be a great deal, as it basically turns your house into cash without having to sell it. There are some requirements, with how much you can get highly dependent on your credit score, income, and value of your home. According to Bankrate.com, “rising home prices across the U.S. have boosted homeowners’ equity to record-setting records”, which means this is the time, more than ever before, to leverage your home’s equity. Here are some of the best ways to do so.
Paying for Home Improvements or Repairs
Renovations can be extremely pricy, and it isn’t always the case that homeowners can plan for it even with a decent-sized rainy-day fund. For example, if you live in Ottawa, a roof repair after a bad storm might require an immediate, significant chunk of change and the best way to pay for it might be with a home equity loan. Additionally, adding new features to your house might substantially raise its value, bringing you a high return on your investment. A new wooden deck might cost you over $10,000 up front, but it will likely recoup over $9,000 of that on the total value of the property and make it more sellable.
For Medical Expenses
If you’re struggling to keep up with medical bills, using a home equity loan could be the answer to your problems. This is especially true if you’re considering using high-interest credit cards to get debt collectors off your back or to simply meet your minimum monthly payments. By using a home equity loan, you should be able to secure a lower interest rate and a lower monthly payment as well. This is another way to pay off such a high bill without running the risk of ruining your credit score in the process.
To Further Your Education
For most people with good credit, a home equity loan offers a lower interest rate than a student loan, making it a good option to those with a family member looking to pursue higher education. Most federally funded student loans have interest rates between 5 and 7% whereas a home equity loan can be as low as 4.25%, which might not sound like much, but adds up to huge savings over the long term.
To Consolidate Debt
Using your home equity can be a smart move when it comes to consolidating debt, especially if your credit cards have a very high-interest rate. It can take a big burden off your shoulders by eliminating several monthly payments and having just one payment to work with – but take caution with this option. Be aware that if you fail to keep up with repaying your loan, you’re putting your house on the line, whereas with credit cards you’re just risking your credit score and having to file for bankruptcy.