Loans: When should you take out a home equity loan?

by Leona Russell 04/17/2022

Home equity loans are term loans that are taken out against the value of your home already paid or the amount of the home owned. For example, homeowners who have paid 25% of their full outstanding loan balance, say $50,000 of a $200,000 mortgage, have that much equity in their home or how much of their home they actually own.

While understanding the basics is imperative for applying for a home equity loan, knowing when to apply for one is just as important.

Here’s a quick guide to the top three reasons most homeowners take out a home equity loan:

Home repairs

Home improvement projects can be taxing on both the homeowner and the homeowner’s budget. However, if the repair is one that will add value to your home, looking into a home equity loan may be a decent option.

This is usually a great way to reinvest your home equity back into your home, especially if you’ve already paid a significant portion of your mortgage’s outstanding balance.

Debt consolidation

For those attempting to defeat high-interest rates and consolidate their credit, utilizing your home’s equity could be another excellent way to manage your financial situation. Many who have adapted to this type of refinancing have found that taking out a low-interest, term-based loan like a home equity loan helped them regain their financial standing.

By using a home equity loan, they’ve managed to reduce their monthly payments in other financial areas and regained their monthly budgets.

Life expenses

Sometimes life happens. It can also happen in a way that’s more expensive than expected or just as costly as anticipated. Regardless of whether you’re paying for a ceremony, helping with a college tuition or simply need the extra money for an unexpected circumstance, a home equity loan can help you manage your expenses.

Just as with debt consolidation or home improvement, applying for a home equity loan during your more expensive life events can help you keep the payments manageable without over stressing you or your wallet.

Home equity loans are excellent ways to make your home and monthly mortgage payments work for you.

If you find yourself wanting to reinvest in your home or simply need an extra bit of assistance, reach out to a lender of your choosing and ask what options they have available for you. They have formulas and methods that can calculate home equity loan rates based on your specific needs and circumstances.

About the Author
Author

Leona Russell

In addition to helping my clients achieve their real estate goals, I help them to understand the tax advantages, financing alternatives, and investment aspects of home ownership and why now is an incredible time to buy. As a licensed Realtor, I'm focused on helping my clients to achieve their real estate goals. Everyone deserves a home. And my goal is to help individuals and families achieve the American dream of homeownership. In addition to providing guidance and managing the transaction, I begin the relationship by getting to know my clients and providing education about the process. I have found that when people understand what is going on and what is expected of them, they are less stressed and enjoy the experience more. Specialties: Teaching/Training, Market Analysis, Loss Mitigation, Negotiation(Certified Distressed Property Expert), Excellent Customer Service, Staging, Relocations, Investments (Residential Finance Consultant)