4 Practical Reasons to Use Home Equity
Home equity is technically the amount of your mortgage that you’ve paid off. Your home’s worth is weighed against what you still owe, so as your home’s value increases and your mortgage sum decreases over time, your home equity will grow.
If your financial situation needs assistance, your home equity can be tapped into to provide a low-cost and convenient way to pay for major life milestones.
Ways to Use Home Equity
With few limitations, home equity loans are an easy and safe way to receive a large cash sum to help pay for various expenses.
Here are a few common reasons why homeowners tap into their home equity.
- College Loans – Using your home equity may be a better option than taking out traditional student loans. In some cases, mortgage interest rates are lower than student loan rates. Student loans may also have a shorter term, making it harder to pay back. A home equity loan is a great way to receive a low-cost loan with plenty of time to repay.
- Debt Consolidation – While it isn’t always advisable to turn short term debt into long term debt, there are times when simplifying credit card bills, student loans, car loans, and other debt into one payment makes sense. Credit cards can carry extremely high interest rates, making repayment of large balances rather difficult. Consolidation creates breathing room for the borrower, but is only successful if the borrower changes their spending habits to avoid getting into serious debt all over again.
- Emergencies – Nothing adds a financial strain more than a medical or family emergency. Sudden unemployment or injury can cost you a significant amount of money in a short amount of time. Home equity loans are a good short-term solution to temporary financial distress.
- Home Improvements – One of the most common reasons to use home equity, home improvements are a wise way to invest your equity as it can feed back into your home’s equity by increasing your property value.
There are a myriad of other reasons to obtain a home equity loan, such as buying a car, paying for a daughter’s wedding, or financing another home. However, it would be advisable to discuss your reasons for using your home’s equity with a qualified mortgage loan professional before starting that process.
Secure a Home and Build Equity with Butler Mortgage
For over 25 years, Butler Mortgage has worked with both first-time and seasoned buyers wanting to own a home in Florida or Georgia. Let us help you find the right loan solution for you by calling 407-931-3800 or by filling out our free consultation form online.