Have you thought about these ways to use your home's equity?
Author: Lisa Novak
When you think of home equity loans, most likely you think of a loan to use for home improvements. But a home equity line of credit is a convenient way to pay for other expenses as well.
- Buying a Car: Though auto loan rates are low, some people may instead like the tax advantages they may get by using their home equity to purchase a car. Be sure to consult with your tax consultant on the eligibility of this type of deduction and how a home equity loan can affect your specific tax situation.
- Purchasing Other Types of Vehicles: Ready to hit the open road and travel in a RV or on a motorcycle? Or maybe you have fantasized about owning a boat or vintage model car. A home equity line of credit offers another option for financing your next dream.
- Debt Consolidation: If you are overwhelmed with having too many debts, such as credit card or medical bills, and are ready to simplify your situation, the equity in your home may provide some debt management at a better rate. Remember though, credit card debt consolidation is only beneficial if the cards you are consolidating are not used or used on a very limited basis until the consolidated debt is paid off.
- Tuition: If you have a college student in your family or have college students for consecutive years in your family, a home equity line of credit allows you to pay those tuition payments as they come due. As you pay the line of credit back, it’s available to use again and again.
- Ongoing Remodeling: Are you starting to think about some larger updates to your home over a longer period of time. If so, a home equity line of credit allows you easy access to your home’s equity, as you need it. No going through a loan process each time, for each project.
Different institutions offer different types of home equity loans. Here are some questions you will want to ask to be sure you are getting the home equity loan that fits your needs:
- What costs are associated with obtaining the loan?
- Are there fees for advances on the loan?
- Are there limits or minimums on advances taken?
- Many home equity lines of credit are variable, because they can be used for a longer period of time. When can the rate change and how it could affect my payments?
- Can I access the available funds with a credit card?
Understanding how your home equity line of credit will work is important, so a good rule of thumb is to work with a financial institution you know and trust.