You’ve owned your home for several years now, building up equity along the way. With major expenses such as college and home repairs looming on the horizon, perhaps you’ve considered a home equity loan. But what constitutes a good reason for borrowing against the value of your house?
One of the most common reasons people take out home equity loans is to put money back into their homes. The right improvements can increase a house’s resale value and make it a nicer place to come home to each day. It’s important to use the money for improvements that give you the best return on investment, however, with a new roof and windows ranking high on the list. While a kitchen or bathroom remodel might be tempting, and even necessary, these upgrades yield a lower ROI compared to exterior improvements such as new siding.
Suppose your child is accepted at a top university. Along with this tremendous honor, you might be facing tremendous tuition and housing costs. Sure you’ve saved for your child’s future, but increased college costs might result in your savings vehicles running out of gas before your child completes school. A home equity loan or home equity line of credit might be the best way to pay for the higher cost of higher education.
Paying Down High-Interest Debt
Credit card debt has a way of sneaking up on people. Before you know it, you’re making just the minimum payments on cards with interest rates as high as 15 percent. Depending on the amount of equity you’ve built up in your home, a home equity loan will almost certainly offer a lower interest rate than most of the credit cards in your wallet. It’s also a good way to consolidate your bills into one payment.
Find out more about borrowing against the equity you’ve built in your home. Contact The First.
What do you think is the best reason to take out a home equity loan? Let us know in the Comments section below.