Top Ten Reasons to Take Out a Home Equity Loan
When you need money, where do you obtain it? There are many sources you might tap into. Credit cards, personal loans, family and friends are just a few of the avenues you might explore.
Three Factors that Build Home Equity
Another option is to borrow against the equity in your home. Three factors might have perfectly combined to create a situation where you have enough equity to borrow against your home:
- Your down payment- The down payment you made on your home created instant equity for you
- Principal Reduction- A portion of your house payment each month further reduces what you owe thereby increasing the home equity
- Home Value- If you’re fortunate, the value of your home has increased or at least stayed flat over the years. This further increases the equity.
So, if these dynamics have created enough equity in your home to borrow against it, you might consider your home as a loan source.
Reasons to Use Your Home Equity
Following are ten reasons to take out a home equity loan:
- The money is there- Your home might be the only source that has the potential to supply the amount of money you need
- Income tax deductions- Most of the time, you can deduct the interest paid on the home equity loan if you itemize on your income taxes. While effectively reducing the taxes you pay, it also can substantially reduce the effective cost of the loan.
- College- Not only will you be educating someone and obtaining an income tax break, again, your home equity might be hefty enough to fund this substantial expense.
- Repayment- If you’re looking for a payment that will stay the same over the life of the loan, that is how a home equity loan is structured. You can budget the same payment amount each month.
- Term- You’ll have the ability to set the term of the loan. If you want lower payments, you can extend the length of the loan.
- Interest Rates- You can usually obtain lower interest rates with a home equity loan than you can with credit cards or personal loans
- Consolidate bills- If you want to consolidate high interest credit card or other bills and take advantage of a tax break, a home equity loan can do that for you
- Pleasure- If there is a dream vacation you’ve always wanted to take but that has stayed out of reach because of cost, a home equity loan can help fund the trip of a lifetime
- Home improvement- If you use home equity money to improve your home via a kitchen remodeling project or a room addition, you can take advantage of all of the benefits of a home equity loan. Plus, your home might increase in value because of the home improvement!
- Easier to obtain- Because your home is the collateral for the loan, a home equity loan may be easier to get than other loan types
Consider a home equity loan when you need cash to fund a variety of situations and want to take advantage of tax benefits at the same time.