Unlock Your Home’s Equity: 6 Savvy Uses
When you purchased your home, you probably had a mental list of wants and needs. While most of your ‘needs’ boxes were checked, maybe you sacrificed some of your ‘wants’. Perhaps you settled on a smaller kitchen because you knew there was potential to expand it later. You may have really wanted a pool, but based on the size of the backyard, you knew you could always add it.
Here’s the good news: if you’re a homeowner, you have a powerful tool at your fingertips – a Home Equity Loan. This unique financing option allows you to unlock the value in your home to fund your goals affordably. So, why put your dreams on hold when you can take a smarter route to achieve them?
What is Home Equity & Why Does It Matter?
Owning a home isn’t just about having a place to live. It’s also about unlocking opportunities, such as using your home’s value to achieve your financial goals.
Home equity is defined as the portion of your home’s value that you own. Equity is calculated by determining the current value of your home and subtracting the amount still owed on your mortgage. You can calculate your home’s equity yourself using the following formula:
Home Equity = Home’s Current Market Value – Mortgage Loan Balance (Amount Owed)
For example, if your home is valued at $375,000 according to current market prices, and you have $225,000 remaining on your mortgage loan, your home’s equity will be roughly $150,000. You can borrow a portion of these funds quickly and affordably through a Home Equity Loan or Home Equity Line of Credit.
Home Equity Loan vs. Home Equity Line of Credit
Tapping into your home’s equity is a significant perk of homeownership. These loans are secured, meaning they use your house as collateral. The financial benefit is that the interest rates are substantially lower than those of alternatives, such as personal loans or credit cards. But lower rates aren’t the only advantage - the terms are much longer, often over 10 years. Longer terms provide much lower monthly payments.
However, deciding to tap into your home’s equity isn’t the only decision to consider. How you access these funds also matters. There are two popular borrowing options: Home Equity Loans and Home Equity Lines of Credit.
- Home Equity Loan:
With a traditional home equity loan, you will receive the funds upfront in a lump sum. The interest rates are usually fixed, meaning they will not change throughout the life of your loan. This option is popular for well-defined projects, such as a home remodel. - Home Equity Line of Credit (HELOC):
Lines of credit function like a credit card: you have a set limit that you can pull from whenever. Once you repay the borrowed portion, you can draw on it again – and you only pay interest on the portion you borrow. The interest rates are usually variable, meaning they can fluctuate with the economy. HELOCs are ideal if you want low-cost funds that you can quickly access as needed over an extended timeframe.
Turning Your Home’s Equity into Opportunities
When people think about “Home Equity” loans, they often assume these tools are solely for home-related expenses, such as remodels or repairs. However, your home’s equity can be used to fund just about anything. That’s why these loans are so beneficial to homeowners.
Here are six of the most common uses for Home Equity Loans:
- Enhancing Your Home
If you’re a homeowner, you likely have a seemingly endless list of necessary repairs and renovation projects you want to complete. Instead of pulling from high-yielding investment accounts or resorting to high-interest loans or credit cards, consider tapping into your home’s equity to finance your projects.
By using your home’s equity to invest in upgrades, you will enhance your living space and likely increase the value of your property at the same time – it’s a financial win-win! - Consolidate Debt
One of the most effective ways to utilize your equity is to consolidate high-interest debt, like personal loans or credit cards. Combining multiple debts into a single, more manageable payment allows you to regain control over your finances. With just one monthly payment and a better rate, you will have a much easier time paying off your financial obligations and can enjoy financial freedom even sooner! - Investing in Education
Education is one of the most valuable investments you can make, whether it’s for yourself or your children. Using your home’s equity to fund a portion of these expenses can provide the opportunity to pursue higher education without significant financial strain. Using a home equity loan or HELOC to finance tuition or other learning expenses ensures that you and your family have access to the education they need to succeed. - Pay for Medical Bills
Unexpected medical expenses can arise at any time. No one likes to think about unexpected expenses, but they’re one of life’s inevitabilities. Sometimes, life’s emergencies are bigger than our emergency funds – that’s when a home equity loan or line of credit can step in to save the day. Whether it’s a medical emergency, major surgeries, or ongoing follow-up treatments, accessing your home’s equity can provide much-needed financial relief in hard times. - Finance a Wedding
Planning a wedding often comes with a hefty price tag that can feel overwhelming. Using your home’s equity to pay for venue rentals, catering, and other expenses can significantly ease the financial burden and allow you to plan the wedding of your dreams. - Create a Financial Safety Net
Life can throw you a financial curveball when you least expect it. You may unexpectedly encounter urgent repairs, a job loss, or unforeseen medical expenses. By leveraging a HELOC, you can quickly create an emergency fund to handle these stressful situations without straining your wallet. Enjoy the peace of mind knowing that your home’s got you covered.
We’re Here to Help!
Taking advantage of your home’s equity can be a powerful tool to help you achieve your financial goals and enhance your quality of life. Whether you’re looking to consolidate debt, pay for major events and expenses, or upgrade your living space, your home’s equity has you covered.
If you want to learn more about our home equity loans or are curious about how much equity is available in your property, we’re ready to help. Please stop by any of our convenient Service Center locations or call us at 800-367-6440 and press 7 today!
By CAMPUS USA