Home equity loans can offer a great way to tap into cash reserves that are tied up without the need to put your home up for sale to cash in the equity (and thus buying a more expensive home now that values of them continue to rise). These loans allow you to borrow up to 80% of the home value in the form of a second mortgage to use for any reason, though there are reasons that are certainly better than using the funds to go on a shopping spree. While a cash-out refinance is an option to take out a new loan to spread over 30 years, there are higher fees associated than either a home equity loan or line of credit. The loan works like your typical one with fixed terms for a set amount, while a line of credit works like a credit card where you are approved for a line amount and can borrow against it at any time, only paying back what you borrow. If you’re on the fence, check out Home Equity Wiz for more tips to help you over, or read on here for common ways to spend your home equity proceeds.
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Home Improvements
Renovation is one of the primary reasons why most homeowners seek out taking out additional funds. Instead of putting on a credit card, you can finally complete the bathroom or kitchen remodel that you have been dreaming out, with payments spread out over the next 15 years or so. Being able to complete these projects not only raise the market value to hopefully recoup what you spent, but it can keep you in your home without the need to move.
Img source: wirechiefelectric.com
Set Children up for Success
While setting up a college savings plan is important to start once your child is born, it may not be possible due to money constraints, so a good way to come up with the tuition coming due is to pull from the equity in your home. On the other hand, if you are able to pay for college via student loans or a savings plan, you can borrow to pay for a wedding, or if you’re even more generous, a down payment on a home.
Debt Consolidation
Other than completing a home renovation to boost value, using a loan for debt consolidation is a great way to combine multiple debts into one manageable payment. Since the interest rate on a home equity loan is lower than a credit card, you will ultimately save more spent in interest over time, while getting out of debt sooner. If you are currently only making the minimum payments on credit cards, you’re hardly putting a dent into the balance and it could take decades clear.
Img source: Debt.org
Take A Needed Vacation
There is a line you can draw on purchases that are ‘needed’, but if you find the family vacations to be few and far between, then this could be a great way to fund a once in a lifetime vacation. Since paying for flights, hotels, not to mention food and entertainment can add up quickly, these funds could give your family vacation memories to last a lifetime.
