For most people, their home is their largest investment. As a home increases in value and you continually pay down your mortgage loan, you can have a good amount of equity. When this happens, you can borrow against the equity in your home by taking out a home equity loan. Home equity loans can be very useful, but they need to be used properly. The top reasons to take out a home equity loan include:

Home Renovations/ Improvements

Remodeling or making home improvements can be costly, and many people don't have the cash on hand to pay for their projects in full. If your home needs to be updated, using a home equity loan is a great way to fund the improvements. The key is to make sure that you're making improvements that increase the value of your home. Kitchen and bathroom remodels are typically good projects to take out a home equity loan for. Having an in-ground pool or choosing other luxury projects typically don't offer as high of a return.

Pay Down Debt

A home equity loan is a secured by your house, so the interest rates are typically lower than other types of loans. If you have a large amount of unsecured debt, such as credit card debt, that has high-interest rates, it can make sense to take out a home equity loan to pay off that debt. In the long run, you'll end up saving money since the interest rate on a home equity loan is much lower than most credit card interest rates.

Emergency Fund

A home equity loan can be a lifesaver when you have emergency expenses pop up. Things like an unexpected job loss, large medical bills, or illness can throw a wrench into your finances. If you have an emergency and need a large amount of money, a home equity loan may be your best option. Just make sure you have a plan in place to make the payments on your loan on time to ensure that you don't risk going into default and having your home foreclosed on due to non-payment of the loan.

Invest in Property

Real estate is typically a sound investment that increases in value over time. A lot of people want to invest in real estate but may not have the cash on hand for a down payment. Using a home equity loan to help you with the down payment on one or more investment properties can be very wise. Just make sure that the rent you charge for your investment properties is enough to cover your mortgage payment and home equity loan payment. 

Contact a company like Frontier Community Credit Union for more information and assistance. 

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