Putting Your Home Equity to Work

Your home equity is one of the most valuable assets that you have. You may have been making payments on your home for a number of years. Slowly but surely you have built some equity. Therefore, if you are thinking about using it for something, you will want to make sure that you are using it for the right reasons. Once you use your home equity, you cannot get it back quickly. Here are a few ways that you can put your home equity to work.

Ways to Access

There are a few different ways that you can access your home equity. One way to do this is to use a standard home equity loan. A home equity loan allows you to make a fixed payment on the money that you borrow over the course of the loan. You will get the entire amount of the loan upfront and then start paying it back. 

Another way to access your home equity is through a home equity line of credit. A home equity line of credit allows you to access the money as you need it. You do not have to borrow the entire amount upfront like with a home equity loan. You will be able to access the money through a checkbook or a debit card. 

You could also get into your equity through a mortgage refinance. When you refinance the loan, you can simply keep the difference between what you owe and the value of the home. This will result in altering your mortgage, but can be beneficial.

Debt Consolidation

One of the best uses of your home equity funds is to consolidate debt. When you take out a home equity loan, the interest rate that you pay will typically be much less than what you are used to with credit cards. When you have several credit cards, the interest can really hurt you. As a result of the interest savings, you will also be able to get a smaller monthly payment. Instead of paying three or four payments every month, you make a single payment to your home equity lender. You can also deduct the interest that you pay on an equity loan. This is not the case when you are paying credit card interest. This advantage can save you a substantial amount of money when tax season comes.

Home Improvement

Another very popular use of home equity funds is to upgrade your existing home. You can add value to your home and make it more enjoyable while you are living there. There are a number of projects that you could use the money for. You could add on a room, update the kitchen cabinets, or put in new hardwood flooring. All of those options and many more could potentially add value to your home. Just make sure that you are putting the money into wise renovations that will actually add value to the house.