Home Equity: Five Things You Didn’t Know You Could Do With It.
What is home equity?
Home equity is the dollar difference between what your home could sell for (i.e. the current value of the home) and what you have left to pay on the mortgage. Essentially, it’s how much of the home you own. The rest is how much the credit union or bank owns.
It’s not cash, though. It’s just an asset you have. That’s where a home equity loan comes in.
What is a home equity loan?
A home equity loan lets you convert the equity of your home into cash you can use.
This type of loan is a consumer loan that lets you borrow against the equity of your house. It’s a fixed loan where you get the money upfront and then pay it back in equal payments over a set period of time.
Here’s are five big things you can do with your home equity:
1. Take a well-deserved vacation.
That family vacation you’ve been saving for? Maybe the one celebrating your parents’ 50th wedding anniversary? Or the final trip all together before the kids start heading off to college?
A home equity loan is a great way to make that trip extra special.
For the cost of just a little interest, you can turn the value of your home into cash and finally afford the perfect spot right on the water, or the excursion everyone will be talking about for years to come.
Dreams made possible.
2. Consolidate credit cards.
Did you know the average Texas family has more than $6,700 in credit card debt? If you have credit card debt, you’re certainly not alone.
Credit card consolidation means you take all the different card payments you would normally make and consolidate them into one monthly payment.
Using a home equity loan to consolidate credit card debt is a great option because rates on these loans are typically much lower than they are on credit cards.
Easier and cheaper? Yes please!
3. Make home improvements.
Those kitchen cabinets you hate to look at every day? The bathroom tile that has years worth of kiddo bath time dirt baked into it?
Updates like that are suddenly within your reach thanks to a home equity loan.
The best part about using equity to make home updates? Home improvements increase the value of your house, so when you do go to sell the home you’ll make more money. The profit will likely offset the cost of the interest you paid on the loan in the first place.
PS: If you need a little “me” space, the same principles apply for adding a she-shed or man cave!
4. Add a pool.
These Tyler summers are no joke. A pool in your own backyard makes summer memories that much more enjoyable and the heat more tolerable.
Just like making home improvements, building a pool will increase the market value of your home. No matter what happens to the housing market, the value we East Texans place in a good, refreshing swimming pool will likely never go away.
5. Cover emergency expenses.
Even if you have a robust savings account, there are times when it might be wise to take out a loan rather than drain all your savings. Paying off a loan in good standing also helps boost credit, which of course is a silver lining during unexpected times
Why get a home equity loan now?
Now is one of the best times to get a home equity loan because, thanks to the post-pandemic housing market, the value of your home has likely never been higher. Don’t just sit on that increased value. Do something with it!