5 Tips for Making the Most of Your Home Equity Loan
If you own a home and have been paying it off for a while, you probably have acquired some home equity. If you’re unfamiliar with what home equity is, it’s simply the difference between your home’s value and the outstanding balance on your mortgage. The resulting number can be used for a variety of things when you get a home equity loan.
Getting a home equity loan can allow you to tap into the value of your home by taking out up to 95 percent of its equity. But when used the right way, a home equity loan can create amazing opportunities for you and your family. With a few home equity loan tips, you can find ways to improve your life substantially.
When you bank with a credit union like Rivermark, you’ll have a knowledgeable staff to help guide you through the process of getting a home equity loan. And once you’ve secured your loan, how you choose to spend it is up to you.
Here are some home equity loan tips that will help you get the most out of your loan.
Consolidate Your Debt
You can actually save money when you use your home equity loan to chip away at your debt. Many people choose to take out home equity loans for the sole purpose of consolidating their debt. Credit card debt, in particular, can be easily managed through a home equity loan.
It may not make sense initially, but taking out money to pay off other debt is a smart decision. If you’ve accumulated a lot of credit card debt, you’ll know that after a while, you’ll be paying more in interest than you’re actually paying off the balance. Credit card interest rates are notoriously high, so paying them off is a hassle when the balances get high. With a home equity loan, you can pay it all off at once and enjoy a much lower interest rate on your home equity loan. Though you’ll still owe the money, the decreased interest will help you to pay it off much faster.
Create an Emergency Fund
Most Americans don’t have a sustainable emergency fund saved up. It’s hard for people to put away an amount of money that could sustain them for months at a time in the event that they were to get laid off or an emergency occurred. One way to ensure you and your family will be covered if a catastrophe strikes is to take out a home equity loan to cover your family’s emergency fund.
An emergency fund can give your family peace of mind while you pay the loan off a little at a time. Though you could eventually save up a large amount by putting a little money aside each month, knowing you have the full amount should you need it is a smart decision.
Complete Home Renovations
Another great way to make the most of your home equity loan is to put the money back into your home. Renovation projects, like installing wood flooring, getting new counters in a kitchen or bathroom, or updating old appliances, are all things that can increase the comfort level and value of your home. If you’ve been wanting to update your home through renovations, a home equity loan can help you achieve that goal.
Though home renovations do have the possibility of increasing home values, that shouldn’t be the main reason you take out a home equity loan. Try to focus on what will make your home more convenient and comfortable for you and your family so that the result of your home renovations will be beneficial. There's no guarantee that those renovations will increase the property value, so make sure they can be enjoyed in case it doesn’t.
Invest in Yourself
When you hear the word “investments,” you probably think of stocks. But there are other ways to make investments with your home equity loan that are safer and more stable than investing that way. One of those ways is to invest in yourself by attaining higher education.
The cost of attending a university is out of reach for most people. This leads them to get student loans. Student loans can have a variety of interest rates, which can mean you carry the loan for longer than you have to. With a home equity loan, you can pay off those loans or pay for your classes and supplies upfront. If your schooling will help you to secure a career that will make paying off the loans easy, then it may be worth the investment.
Get Your Home Equity Loan Through a Credit Union
The guidelines and conditions of your home equity loan will vary depending on who you bank with. Some will offer larger interest rates, intro offers, and a variety of fees, so you should shop around when you’re looking into getting a home equity loan.
Credit unions are a good way to go when searching for a home equity loan. They’re not-for-profit financial institutions, which allows them to keep interest rates lower than most lenders. They’re also able to provide you with other financial services and great customer service when you become a member. Rivermark offers no annual fee or prepayment penalties with home equity loans. They also offer fixed monthly payments to make budgeting much easier and the possibility of borrowing up to 95 percent of your home’s equity.
At Rivermark, you can apply for a home equity loan and be eligible for a variety of other financial services like savings and checking accounts. A home equity loan can be a good start to a lifelong banking relationship with Rivermark. If you’re curious as to how much home equity you currently have, use our free home equity calculator to figure it out. Then, contact one of our branches in Oregon to start the process.