If you have had any exposure to the housing market in the last few years you know that home values have gone up. According to a recent article in the Washington Post, home prices will continue to climb in 2018.
That means homeowners could be sitting on a pile of cash without even realizing it. Translate that into good news for those wishing to sell. But it can also help when homeowners need to get a home equity loan.
Often, homeowners will get a home equity loan for home improvements such as repairs, maintenance, or remodeling. But there are other reasons to get a home equity loan they may not even be aware of.
For instance, they may wish to send one or more of their children to college. Or, they could wish to consolidate their debts and make only one payment each month instead of several.
If you would like to consolidate your bills to make debt pay off easier, you might consider getting a home equity loan. LendingTree can help you compare offers to find the best rate and loan for your situation.
What a Home Equity Loan is
There are two different types of home loans you can get. One is a regular home equity loan which gives you, the owner, money to be used for a particular reason. This is basically a traditional mortgage.
The other type of home loan you could get is a home equity line of credit, or HELOC. This kind of loan is a little bit different because it is only for a certain length of time, typically 10 years.
You have flexibility with a HELOC loan because you don’t have to spend it all at once. Instead, you can use it gradually. Because your home is the collateral, interest rates are often lower than with other kinds of credit you could use. You also only pay interest on the money used.
When you get a HELOC loan, the interest you pay can be taken off your taxes. How much you can deduct depends on how you use the money. If it is used for home improvements you can expect to deduct more.
What a Home Equity Loan Can Be Used For
Many people don’t know they can get a home equity loan for things other than home improvement. If you have good credit you can actually get one for nearly anything since the loan is secured by your home. Plus , did you know that bad credit loans site Simple Payday says that online loans in the UK are seeing considerable growth as consumers increasingly turn to short term credit solutions.
This makes it a great financial tool to use when you need it. Especially when you consider that at least some of the interest can be taken off your taxes.
But another reason to choose a HELOC is because of the fantastic flexibility. Since it can be used a little at a time a HELOC is perfect for using on things you don’t have a solid price for.
Funding a College Education
Lots of people go to college to improve their education and quality of life. But college expenses are higher than ever which makes getting a loan nearly a necessity.
If you or one of your children try to get a student loan you will find the interest is higher than for a home equity loan. But if you try to get a personal loan as an alternative the interest is higher yet.
While you could argue that student loan interest is also tax deductible, the cap is $2500, which is much less than with a home equity loan or HELOC.
Why waste money when you could deduct more interest from your taxes using a home equity loan as a financial tool?
Paying Medical Bills
Health insurance rates have skyrocketed in the last several years. To make matters worse, deductibles and co-insurance have gone up as well.
This has created a financial hardship for many people needing healthcare who can barely afford the insurance alone. Of course, some people don’t have insurance in the first place.
You can only deduct a percentage of your expenses if they exceed 7.5% of your adjusted gross income for 2017. However, with a home equity loan you may be able to deduct much more.
If you are a good negotiator you might be able to get your medical bills lowered if you pay them in full. Save enough and it could more than pay for the low interest rate, especially when coupled with the tax deduction you’ll get.
Consolidating Debt
If you have high interest debt, such as that from credit cards, you could get a home equity loan to consolidate it and pay it off faster. LendingTree will help you find the best loan for your situation by allowing you to compare rates and terms over the internet. Finding a good interest rate can save you hundreds, if not thousands, in interest.
As you know, interest on credit card debt is not tax deductible. However, you can deduct the interest on your HELOC or home equity loan. Using them can help you achieve financial freedom from debt quicker than if you just keep paying each individual bill as it comes.
How to Access Your Home’s Equity
If your property qualifies and you have a good credit score you should be able to get a home equity loan or HELOC.
The most recent appraisal of your home will not be used for a home equity loan. This is because many home values are found to have increased since the last one was done. Therefore, a new appraisal would be done to figure your loan value.
Obviously, this is a good thing for you as the homeowner. It allows you to get a higher dollar amount for your loan than if the most recent appraisal was used instead.
As you can see, it is possible to tap into the equity on your home to improve your quality of life in many ways. Pay for college, medical bills, past debts, home renovations, and many other things while deducting the interest is a huge benefit many people don’t know about. Use this opportunity to add value to your life by utilizing this smart financial tool.
