4 Ways To Take Advantage Of A Home Equity Loan
Buying your first home? There’s so many things to consider before moving out. Apparently, you can do much more with a home equity loan than you think. You can use it for home-related expenses aimed at improving your house and property, but that is not all.
You can use a home equity loan for virtually anything as we’ll discuss in this post, but before that, let’s discuss the meaning of home equity.
DEFINITION OF HOME EQUITY LOAN
A home equity loan is a bulk amount of money borrowed using a mortgaged home equity as collateral on the condition that the home is worth more than is owed in it. This kind of loan is known as Home Equity Line of Credit (HELOC). You need to understand that difference between HELOC and a second mortgage.
Before you can borrow money against your home equity, you have to meet up with the requirements of the HELOC lender; which vary in most cases. Some of the basic requirements you have to meet include the following:
- A decent credit score. Check your credit to see if you have a good credit score, at least 620. If so, then you have a high chance of qualifying for a home equity loan
- An available equity that’s worth at least 85% of your home equity
- At least 43% in debt to income ratio
- An impressive financial history
If you at least meet all of these requirements, then your chances of qualifying for a HELOC are quite high.
HOW TO TAKE ADVANTAGE OF HOME EQUITY
It’s been a long time coming, so let’s get into it. Here are 4 ways you can take advantage of a home equity.
This is the number one reason people take out loans against their home equity. It is actually a really good investment – undertaking repairs, functional upgrade, cosmetic improvement, etc – all these increases the value of your home.
- FINANCIAL INVESTMENTS:
Let’s say you have an interesting business idea but have no capital to start off, a HELOC can be your saving grace. You can trade the stock market, invest in landed properties, start your new business, etc with a HELOC.
- TUITION FEES:
Here is one of the things you should know about student loans, it constitutes to a $1.5 trillion debt crisis in the US alone. The student loan repayment process has always been an issue to many and will continue to be so if something is not done about it.
Taking out a loan on your home equity for educational purposes is a great way to reduce the student loan crisis that’s happening. At least, you’ll get a significant discount for paying for courses upfront.
- DEBT PAYMENT:
When you have a lot of debts to pay off, you’ll tend to get overwhelmed every now and then. If you have a student loan, car loan, outstanding credit card balance, mortgage, personal loans, etc, and they’re choking you, it may not be a bad idea to take out a loan against your home equity to settle all the other loans and concentrate on just one or two.
As much as home equity is a great way to access bulk money with low interest, you may want to do your homework in depth and even reach out to a certified financial expert to help you make the right decision. You’ll discuss the options available to your unique situation, and the best fit for your financial future. We also have tips for you to fit your mortgage into your budget!
We know things may be challenging at first to navigate, but WalletGyde is here to help!
We’ll be glad to hear what you have to say about how to take advantage of home equity. So feel free to drop your views and questions in the comment section below. Stay tuned this week for more on renting and buying!