Securing a home loan with bad credit can be challenging, but it’s not impossible. While…
When should you tap into home equity?
Your home can be a valuable financial resource if you’re looking to fund an important project or consolidate debt. Accessing your equity through a loan, home equity line of credit or cash-out refinance can be a smart move in the right circumstances.
However, it’s important to carefully review the potential risks involved. If you’re considering using your home as collateral for a loan, ensuring you can comfortably manage repayments (even if unexpected events occur) is essential.
By being informed and cautious, you can make the most of your home equity to achieve your goals.
When is it wise to use home equity?
Home improvements: Improvements that can add functionality, increase your home’s value and pay for themselves over time are a safe bet. Plus, if you use a home equity loan to fund home improvements, your interest payments could be tax deductible.
Debt consolidation: Consolidating high-interest loans and credit card balances into a relatively low-interest home equity loan or HELOC can net significant long-term savings. But to make this venture worthwhile, you should avoid running up new debt. If done responsibly, debt consolidation can be an excellent way to stabilize your finances and improve your credit.
When should you think twice about using home equity?
Funding education: While you can often get larger amounts and lower rates with home equity financing, proceed with caution. Taking on large debt later in life can put your home at risk and potentially delay your retirement.
Large purchases: With items such as a new car or RV, traditional financing that uses the item as collateral is more advisable. That way, if you can’t continue making payments, you only lose the vehicle and not your home.
Once-in-a-lifetime events: Weddings, honeymoons and vacations can provide fond memories for years to come. But such events shouldn’t put your home at risk — you may be better off considering other financing options.
Thinking of tapping into your home equity? Reach out today to discuss your options.