When talking about home
equity, many people become stumped. But, it’s actually quite simple. It’s the
difference between your home’s value on the market, and what you still owe on
it. If you're a homeowner, you may be able to use this equity as collateral to
borrow money! There are two ways you can do this: 1. Home equity loans
immediately advance you a single sum of money and usually require payments over
a fixed period at a fixed interest rate OR 2. Home equity lines of credit give
you the option of borrowing money as you need it, up to the amount your lender approves
for you. Rates vary, so your payments may vary. If you have equity, here are a
few smart ways to use a home equity loan!
1) Debt Consolidation – This is a good
option if you have several balances on several credit cards or other loans. By consolidating multiple balances into a single home equity loan,
you can simplify your life and find that you may have a dramatic reduction in
your borrowing costs. But be careful- debt consolidation only works if you have
self-discipline. If you run your cards again and rack up those balances yet
again, you’ll be in worse shape.
2)
Home
Improvement– If you’re thinking about getting new counter tops or renovating
your bathroom, a home equity loan is perfect. However,
consider the long-term economic value of the project and how long you expect to
stay in your current home and enjoy the results!
3)
Covering A
Big Expense- Getting married?
Sending your child to college?
Whatever your big expense coming up might be, a home equity might be the
solution to paying for it. You can use
some home equity loans for literally anything, so think bigger picture than
just home improvements!
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