What Can You Use a Home Equity Loan For?
More Than You Probably Realize!
Did you know you can transform the equity in your home into a convenient source of funding? A home equity loan offers enormous potential for things like managing debt, renovating property, or supporting a business endeavour.
Breaking Down Home Equity
As the catch-all phrase for a wide range of loan types, a home equity loan lets you take advantage of the value you’ve built up in your property. By using that value as collateral, you can borrow the money you need to:
- consolidate debt,
- update your home,
- set up and grow a business, or
- cover a financial shortfall
Home equity may sound complicated, but it’s really just the difference between how much your home is worth and how much you owe on your mortgage. If your home is currently valued at $500,000 for example – and you owe $200,000 – your home equity is $300,000.
Even more appealing is the fact that as you pay your mortgage down – or if the value of your property goes up – your home equity increases! And you can borrow against your property at any time with a second mortgage secured by your current home equity.
How to Take Advantage of a Home Equity Loan
One of the biggest advantages of a home equity loan is that you can usually access larger amounts of funding at lower interest rates than you could with an unsecured loan (no collateral).
Not all financial institutions offer home equity loans, however. So, working with a private lender may be your best bet for tapping into your property’s equity.
Let’s take a look at how applying for home equity financing from an alternative loan specialist can help you pay down debt, build up future property value, or bridge a temporary financing gap.
Consolidate Your Debt
Debt consolidation is what happens when you take out a single loan – in this case a home equity loan – to pay off a number of smaller loans, bills, or debts.
The benefits of using the equity in your home to merge your debts are many, including the opportunity it provides to:
- Lower your monthly payment,
- Simplify your bill tracking,
- Reduce your overall interest rate, and
- Get out of debt faster
A debt consolidation loan based on home equity can help you turn credit card bills and other growing financial burdens into one simple, combined monthly payment.
Renovate Your Home
Financing your home renovations with a house equity loan isn’t just possible, it’s a great way to use the equity in your property to increase its value!
Whether you want to repair or renovate your existing house – or upgrade and sell an investment property – there are a number of finance options out there.
But consider this:
- Using credit cards to pay for supplies comes with high interest rates and short payment terms,
- Getting a personal finance loan or line of credit to support your project can be tough with the banks’ strict lending requirements , and
- The funds yielded by refinance mortgages can take many years to pay down
Choosing an equity-based renovation loan to fund your home improvements may be your best solution. Home equity loans typically offer lower interest rates, more reasonable repayment periods – and fast access to cash regardless of your income or credit history.
Fund Your Business
Ready to exchange the 9-5 grind for an entrepreneurial lifestyle? Your home can help. Using a home equity loan to start or expand an existing business lets you avoid the hoops and hurdles attached to many small business loans.
Unlike traditional financial institutions, private lenders are far more concerned with the value you hold in home equity – and far less concerned with your experience or business loan plans. If you own your own home, chances are good you can use your equity to get the business cash or capital you need.
A Final Word
There’s a wealth of ways in which leveraging home equity can make your life easier. In fact, many people view a home equity loan as their go-to resource for meeting any number of financial needs. Use it for uncomplicated funding of your child’s tuition, that once-in-a-lifetime family vacation, or to pay unexpected expenses like medical bills, tax debt, or property damage.