3 reasons to consider a home equity loan
At some point or another, most homeowners have found themselves in a position where they need to free up money on a short deadline. Whether to cover unforeseen repairs or consolidate debt, finding cash to cover major expenses can be a major headache.
Fortunately, if you’ve been making steady payments on your mortgage for years, you’ve built up quite a bit of value in your home — value you can borrow against in the form of a home equity loan to deal with urgent financial obligations.
If you’re a homeowner in need of money, here are three ways a home equity loan might be the ideal solution.
1. Home Equity Loans Can Help You Consolidate Debt
Nothing limits your ability to improve your financial position like multiple unsecured debts from credit cards or payday loan companies. With interest rates sometimes as high as 20%, this debt quickly gets out of hand, and pulling out of the debt spiral can be very difficult.
One of the best things homeowners carrying a lot of unsecured debt can do to get back on track is take out a home equity loan. Leveraging the value of your home to free up enough cash for a lump sum payment can help you get rid of these liabilities once and for all.
If you want to apply for a home equity loan then working with a mortgage brokerage who can help you find the right lender who is the best fit for your situation may be the best way to do so.
2. Home Equity Loans Can Help You Enhance Property Value
The value of your home isn’t just useful for consolidating debt, however — it can also go toward renovations and repairs to improve your property. In fact, home equity is one of the most common tools homeowners use to pay for major expenses related to projects like:
- Installing a new roof
- Building an extension/deck
- Replacing a water heater or furnace
- Foundation repair
- Fixing water damage
If your insurance won’t cover the cost of a much-needed maintenance job, taking out a home equity loan is a great way to make sure the work is done as quickly as possible. Because these renovations are direct investments in your property, you’re sure to recoup the cost of the loan in the long run.
3. Home Equity Loans Offering More Favorable Terms than Unsecured Loans
Modern banking offers many options for borrowing, from lines of credit to one-time loans. But what makes home equity loans particularly appealing is the fact that they are backed by a tangible asset that reduces the risk to the lender.
Unlike other types of debt, a home equity loan is secured by the value of your property, lowering the interest rate and making it possible even for those with bad credit to borrow.
One of the best things about owning your own home is that after years of monthly payments, you will have an asset that could be worth considerably more than you originally paid for it.
But you don’t have to wait until your mortgage is paid off to be able to benefit from the equity you’re building up: by taking out a home equity loan through a mortgage brokerage, you can finance everything from debt consolidation to major renovations, regardless of your credit score.
