Fundamentally, accessing the equity in your home can provide a means to borrow money rather than using credit cards or a personal loan.
Home equity can be borrowed as a line of credit or a lump sum, and many people making a big, one-time purchase will take the lump sum option – a fixed rate home equity loan.
The benefits of a fixed rate home equity loan include low-interest rates and the fact that your interest is usually tax deductible, which is something that most other types of loans can’t offer. Special offers from banks and credit unions on home equity loans can lower your costs even further.
Why take out a fixed rate home equity loan? Here are the top three reasons to tap into your home equity.
Paying for home improvements is one of the most popular reasons to take out a home equity loan. Essentially, you are leveraging the value of your home to make it worth even more in the future. With a fixed rate home equity loan, you can use a lump sum of money to replace the roof, redo the bathroom or update the kitchen with all new fixtures and appliances. Your monthly interest rate will be lower than with a credit card or personal loan, and when you finally do sell your house, you may be able to ask more for it thanks to the remodeling work that your home equity loan helped fund.
If you’re looking to go back to school or fund college for a family member, a home equity loan can be a cost-effective way to pay. Whereas a federal PLUS loan from the U.S. Department of Education currently offers an interest rate of 6.31%, a fixed rate home equity loan can offer interest rates as low as 3.75%. Home equity also has another key advantage – it’s tax deductible, which further reduces the cost of borrowing.
Although home equity loans are often put towards home repairs, in fact, home equity can be used to pay for all kinds of purchases. A fixed rate home equity loan means you get all your funds at the same time, in one lump sum – making this a good option for anyone planning a large, one-time purchase like a new car. Home equity interest rates are usually lower than auto loan interest rates and the loan is tax deductible, however keep your home equity loan time frame in mind, as you may not want to be paying on the loan long after you no longer have the car.
Interested in learning more about how to make your plans a reality with a home equity loan? Check out HUECU to find out how.