5 Considerations When it Comes to Home Equity
At Origin we strive to make your money work harder and smarter. One way to maximize and stabilize your financial opportunities is through a home equity loan or line of credit. This can provide some real financial muscle for qualified homeowners.
A home equity loan or credit line is essentially a second mortgage – your home is used as collateral to borrow against some of its equity. You have equity when the market value of your home is higher than what you owe on the mortgage.
The key, of course, is making that value work for you.
Origin’s lending experts put together five ways to leverage a home equity loan and create greater financial advantages for you and your family.
- Home improvements - Rolling equity back into your home for repairs and upgrades can be a shrewd move. Replacing a bad roof, for example, prevents leaks and damages that could turn into bigger problems. Upgrades can add value to your home and increase the price if you sell later. Just be sure to spend time researching which remodeling projects add value – not all of them do, and be prepared to budget carefully.
- Consolidating credit card debt - This could be a money-saving option, especially if a home equity loan carries a lower interest rate than your credit cards. If your cards have variable rates and payment amounts, a consolidation loan might also offer more stability, and you could wind up with lower minimum monthly payments. A note of caution, though – you’ll need to be more disciplined with your spending while your cards are being paid off.
- Higher education - With college tuition steadily rising, a home equity loan can be the game changer for many families trying to finance higher education. Home loans often – though not always – come with a better interest rate than student loans. One caveat is that federal student loans usually carry benefits like payment deferment and income-driven repayment. Keep in mind these federal benefits are not on the table with a private home loan.
- Down payment on a rental home - A rental home generates money, so in this case, you’re leveraging your home’s equity as an investment. It could be a smart investment, considering that home equity loans are among the cheapest ways to borrow. Ideally, your tenants’ rental payments would be enough to cover the mortgage and other monthly expenses like taxes and maintenance. Keep in mind it doesn’t always work out that way, and your properties could lose value.
- Medical expenses - There are several caveats here, but a home equity loan might be crucial when facing large medical bills that you don’t want to end up on credit cards. It’s also another case where you could get a lower interest rate and lower your monthly payment. If you take this route, it’s highly recommended that you understand the risks and talk to an expert beforehand. Need more ideas on how to leverage your home’s equity? Contact an Origin mortgage loan officer. When it comes to lending, we’re here to help you see the larger picture and choose the option that’s best for you.