Mortgage
5 Considerations When it Comes to Home Equity
Are you a qualified homeowner looking to make your money work harder and smarter? With Origin, you can maximize and stabilize your financial opportunities through a home equity loan or line of credit, providing some real financial muscle.
What exactly is a home equity loan or credit line? In a nutshell, it’s a second mortgage using your home 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 snowball 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, because not all projects are created equal. And as always, be prepared to budget carefully.
- Consolidating credit card debt. If your home equity loan carries a lower interest rate than your credit cards, this can be a smart money-saving option. If, for example, your cards have variable rates and payment amounts, a consolidation loan might offer more stability. The result? Lower minimum monthly payments. However, keep in mind that 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 a game-changer for 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 that these federal benefits are not on the table with a private home loan.
- Down payment on a rental home. A rental home generates passive income, so in this case, you’re leveraging your home’s equity as an investment. Considering that home equity loans are among the cheapest ways to borrow, this can be a smart investment. Ideally, your tenants’ rental payments would be enough to cover the mortgage and other monthly expenses like taxes and maintenance. However, keep in mind that it doesn’t always work out that way, and your properties could lose value.
- Medical expenses. Facing large medical bills you don’t want to put on credit cards? There are several caveats here, but a home equity loan can help, often offering lower interest rates and lower monthly payments. If you take this route, it’s highly recommended that you understand the risks and talk to an expert beforehand.
When it comes to lending, we’re here to help you see the bigger picture and choose the option that’s best for you. Need more ideas on how to leverage your home’s equity? Contact an Origin mortgage loan officer or explore our loan products for more information.