Using Home Equity Loan for Renovations & Home Improvements
When you are paying down your mortgage, you are building equity in your home. You can use this equity and get a home equity loan or home equity line of credit (HELOC). This loan can be a smart way to pay for home renovations and basement finishing projects, which help increase your home’s value and of course, increase your equity.
what is Home Equity Loan?
Home Equity is a good way to cover the costs of home improvements, It’s a loan for a fixed amount of money that is secured by your home, and you can repay your loan with equal monthly payments over time. Is the same as mortgage.
Benefits of using home equity for renovations and home improvements
Return on Investment : Its smart idea to invest in your home whether you are looking for new and more comfortable place for you and your family or you are looking to sell it. Renovations may help your home sell faster and for more money.
Tax Deduction: The interest you pay on home equity loan is tax deductible if the money is used to repair, remodel or otherwise improve the value of the home that secures the loan.
Low interest rates: Home Equity Loan has low interest rate because its purpose to let home owners maintain or Improve property value.
Can be re-payed over a long period of time: Home Equity loans come with lengthier terms than personal loans – from 5 to 30 years.
All money is disbursed upfront: So its faster and easier for big improvement project and you can start right away and if you are not planning to start immediately you can move the money to an interest-bearing account and earn money on your money.
The Cons of home equity loan:
- If your project is going to take a long time you may be tempted to spend the money on other things instead.
- If the home market value goes down you may owe more on the loan than the home worth.
- If you stop making payments the bank can start take possession of your home.
Some thoughtful tips:
- Monitor your home equity on a regular basis.
- Keep track of the approximate value of your home, as well as the balance on your primary mortgage.
- Avoid taking out a home equity loan or cash-out refinance to use the money for consumer items.
- Decide for home improvement projects that increase the value of your home.
- Consult our team of experts for best loan options with be renovations project.