Homeowners who have equity built up in their homes can tap into that equity using a home equity line of credit, or HELOC. This financial tool can be a great way to accomplish a number of financial goals.
Here are four excellent uses of a HELOC for homeowners to consider.
Consolidating Costly Debts
Credit card debt and other types of consumer loans are costly, unless a debtor is lucky enough to have a no-interest card. Borrowers can consolidate that debt into a HELOC, which is much more affordable because it is a secured debt.
This advantage only works if the borrower stops adding to the debt problem. A HELOC becomes a valuable tool to get rid of debt quickly when used properly.
Create An Emergency Fund
Most people do not intend to end up in credit trouble, but emergencies happen. Emergency home repairs, job loss, or car repairs can quickly add up to unwanted debt.
A HELOC provides homeowners the option to have an emergency fund. Should one of these emergencies pop up, the homeowner can use the HELOC for an affordable source of funds.
Home Repairs That Add Value
Some home repairs add value to the property, but are also expensive. A HELOC can provide a source to fund these repairs. Because they put value back into the property, homeowners may be making wise use of their equity when using the HELOC in this way.
To make this work well, homeowners should choose repairs that do add to the home’s value. Since the cost of the repairs comes from the equity, the home’s owner should recoup the costs later when selling the home.
Funds For Investing
Finally, homeowners can use funds from a HELOC to get started in investment. This is risky, because the loan is paid regardless of how successful the investment is, but it can give a homeowner the chance to start investing for the first time.
Similarly, retirees can sometimes use HELOC funds to supplement retirement income if investments are struggling. This is a temporary solution to give investments a chance to recover, but for those living on a fixed income it is very helpful to have this option.
The HELOC is a valuable tool for homeowners that allows them to tap equity when it is needed. Since they have spent years building up this equity, homeowners should not fear using it when it can help with their financial goals.
Contact your trusted loan professional to find out if a HELOC may be right for you.
There are times in our lives when the idea of freeing up cash becomes desirable or necessary. Near retirement, this is a common consideration. The typical financial tool that many retirees want to know about is a reverse mortgage, but it’s not the only equity tool available.
US homeowners now have over 5 trillion dollars in home equity which is a very large amount of money! So this year may be the year for a lot of cash out refinances and other home equity mortgage products. Most often, when you are purchasing a home, you are buying at or below the appraised value and you are making a down payment.
So you’ve been a homeowner for some time. You’ve been faithfully paying off your mortgage for years, and you have a fair bit of equity built up in your home – and that makes you proud. But now, you’re wondering what good equity is if you’re not using it.