There are several home equity loan reasons that you may cite for requiring some loan for your home. A home equity loan can help you with debt consolidation, home improvement projects, educational expenses, business investments, and more. No matter what you choose for your home equity loan, this type of loan can be an excellent tool for helping you unlock long-term value in your home.
Home equity loans explained:
Although you may not have considered a home equity loan in the past, this type of loan can be similar to a mortgage, with the equity you have in your home serving as collateral with your lender. You can borrow as much as 80-90% of the total home value. Your interest rate can be considerably lower than some other loans, which can be lowered further if you have good credit.
Most of these loans have repayment terms like a conventional mortgage, and you must make regular payments.
If you decide that a home equity loan is the best choice for your financial needs, remember some things. Make sure you shop around and compare different lenders to get the best interest rate possible. Also, be aware of any fees associated with the loan, such as closing costs or other fees that may be charged. Finally, ensure you understand the loan terms and repayment schedule before signing any documents.
No matter your home equity loan reasons, it’s essential to consider that these are some of the easiest loans to obtain and a great way to keep cash on hand for several reasons when required.
The basic requirements for a home equity loan:
Most home equity loans require your equity in the home to be at least 20% of the home value. You will need to provide your income history from the last two years and a credit score greater than 600.
Loan interest rates on home equity loans usually sit at an average between 5.28% interest on a short-term 5-year loan and 5.82% on a 15-year loan.
If you have home improvements that have been delayed, a home equity loan can help you complete the projects. A home improvement loan is also one of the most popular ways to use a home equity loan.
Here are some of the top home equity loan reasons that homeowners list when they take out a loan from significant lenders across the USA:
You Can Repair Those Out-of-Sight Systems
Out-of-sight systems in your home, like your HVAC system, plumbing, or wiring, can become costly. Whether for repairs or upgrading your system, a home equity loan can help with the cost of upkeep. Home equity loan reasons for repairing these crucial systems will ensure that your home can remain efficient and running without significant risks of fire or flooding.
If you have an older furnace or HVAC system, you could take advantage of many efficient improvements that new systems can bring. Energy star-rated HVAC appliances use up to 40% less energy compared to models installed a decade ago, and this can mean long-term cost savings for your home.
A regular furnace repair appointment or septic system cleaner can be a significant step in using some of your home equity loan to identify major repair areas. Looking into systems that could cost you more money in the future, such as a new plumbing system, can be beneficial when using your home equity loan.
You Can Use it to Invest in Sustainable Energy Usage
One of the most popular home equity loan reasons in 2022 is to look towards sustainable energy use in your home. Locking in your rates on HVAC services or electricity by becoming self-reliant with solar heating or power can be a great way to save money on utility bills. A home equity loan can offer the funds necessary to make renewable energy investments and help you reduce your electricity bill significantly. The cost of services will only grow with inflation, but you could set up your home with systems that make it self-reliant. Solar panel setups may even allow you to earn a credit from your electric company. A sustainable energy investment for your home can be one of the best ways to see long-term savings and improvements to your resale value. A solar power system could be expensive up front, but the home equity loan will give you access to the funds you need right out of your home equity.
You Can Refurbish That Room You’ve Been Neglecting
A room that needs updating or a space that needs conversion is an important way to add value to your home. Creating a space for a new family member, a functional office, or simply updating your kitchen with new countertops and appliances can be common home equity loan reasons that add value to your home. You could prepare your home for a parent that is moving in or invest in an older home with the loan rather than make an expensive move in unfavorable market conditions. Bathroom remodeling for an aging bathroom, complete with drain cleaning and efficiency improvements, can be an area to consider when looking at secondary rooms to refurbish too.
Home equity loans are commonly used to help manage high-interest debts. Because they are usually low-interest loans, many homeowners consolidate their debts at a much lower rate over time. With consumer debt like credit card debt which can carry interest rates of double even to quadruple the rates of a home equity loan, a homeowner taking out the loan can quickly pay off the high-interest debt and potentially have fewer payments to make each month. Home equity loans can be paid off in 15-year repayment plans, but it is essential to talk with a local lender to understand the terms of the loan and repayment periods. Nevertheless, a home equity loan offers a lower interest rate and a longer payback period than any other consumer debt or loan product.
You Can Make Long-Term Investments
Systems in your home can be a long-term investment. Home equity loan reasons should be about adding long-term value to your home so that you can use your equity to ensure your longevity in that property. Items like calling a local roofer to replace your roof or updating your HVAC system to a new one can be items you invest in for long-term use. Major repairs like foundation leveling or chimney repair can help you feel safe and secure in your home for many years. Neglecting these items could put you on the hook for expensive emergency repairs.
Investing in regular inspection appointments from a roofer and getting a structural survey of your home can ensure that you can handle major repair costs before they become a problem. If a contractor can identify a big improvement for your home, like a new roof structure, siding, or windows, you can use a home equity loan to make those investments.
You Can Finally Upgrade Your Floors
Flooring can be one of the best investments to make in your home. Home equity loan reasons often include redoing dated flooring or areas of your home that may have become more worn over time. A durable wood or laminate flooring option can be a great addition to your home and update the look of your interiors. Going to a rug repair company to remove any of the runs or stains in your rug could be a cost-effective alternative to complete flooring replacement for some of the rooms where your flooring is worn in only a few patches. Upgrading your floors can be a long-term investment when you choose materials like hardwood or tile that last longer than carpets and other floor coverings. Upgrading your floors is a fantastic way to make cleaning your home easier and act as a better insulator for your HVAC system. New flooring can be a significant improvement in any room that is installed.
You Can Keep Your Family Safe
Areas of your home may be dangerous to your family, and you may not know it. Mold inspection services should be a priority for your home if you last had an inspection several years ago. Mold remediation can remove any dangerous molds growing in your home. The mold spores can compromise your indoor air quality and the integrity of materials in your home and likely make your family sick. Home equity loan reasons should include investments in safety and security so that you can ensure your family is healthy and safe. Fire safety systems, locksmith services, or even a complete alarm system are all possible ways to use the funds from an equity loan to secure your family’s well-being. If you have ignored items like mold or a security system, now is the time to use your home equity to make those improvements. You could improve your family’s health, and it’s a great way to lower your insurance rates throughout the year.
You May Treat Yourself
Home equity loan reasons can be for serious and long-term investments. You could treat yourself to new entertainment items for your home, such as a home theatre room, games room, or other recreational features. Inground hot tubs and pools are also a nice addition to your home that you can use to relax and enjoy the season. Home gyms, outdoor living rooms with fire pits, or even outdoor kitchens can all be wonderful items to add to your home for years of enjoyment. The best part about a home equity loan is that you can take the equity you have built up in your property and finally turn it into something you can use to better your property for today. There’s nothing wrong with using your home equity loan for a bit of enjoyment and luxury in the home that you have decided to stay in.
Use your home equity wisely
Treating yourself with some of the home equity loans is an excellent way to reward yourself for the hard work you’ve put in to build equity in your property. However, you must use your home equity loan wisely and invest in items that will benefit the structure of your home and make it safer for you and your family. You should always consult a certified contractor to ensure any repairs or renovations are done correctly before taking out a home equity loan to cover them. Remember that you are using your home as collateral, so ensure it is in tip-top shape. Invest in items that will add value to the structure of your property, and you can recoup the costs when it comes time to sell.
Most financial advisors would agree that the worst reasons to use a home equity loan are for vacations or luxury items. These will not add any value to your home and would be considered a savvy financial decision. Home equity loans can be used for various reasons, but you should always ensure that the investments you make in your home are worthwhile and beneficial to your future. Don’t overborrow, and don’t overextend your finances beyond your loan, or you could risk the potential of foreclosure on your property if you can’t pay. Consider your budget and ensure that you can keep paying for your mortgage and expenses on top of the new home equity loan payments you will be responsible for.
Overall, home equity loans can be great options to improve your home, prepare more extensive repairs and upgrades, and create long-term investments. Ensure that you speak with a financial advisor or housing expert before taking on any loan terms to ensure the best rate and long-term value. Whether you want to upgrade your living space, ensure safety in your property, or treat yourself to some luxury items for the home, a home equity loan could be the solution you’ve been looking for.