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HelpMost Americans spend more time at home than any other place, including their workplace. One’s home provides a place to relax after work, spend time with the family, and entertain guests. But in today’s harsh economic climate many people are feeling a bit uneasy about their finances. Fortunately equity in one’s home can provide a source of cash to pay the bills or fund home improvement projects for example.
Yes, this is a fact, your home can actually save you financially, provided you have built up some equity. Most banks that serve as home equity lenders will extend credit to you based on your available home’s equity, the difference between your home’s appraised value and any outstanding mortgage balances. If you have equity in your home, here are some reasons you may want to tap it:
- Paying for home repair or remodeling projects. In this case not only can an equity line help fund the project, but you are also increasing your home’s value to boot.
- Funding a child’s college education. Parents without savings or the ability to get a low rate college loan can tap their home’s equity to fund the college costs of their child. Naturally your first choice would be a separate student loan with a home equity loan filling in the gaps.
- Emergency cash. The old rule of thumb is that you should have 3 months of salary in the bank to cover unexpected emergencies. But most people have far less in savings. A home equity line of credit can provide needed cash quickly in the event of an emergency and best of all you only pay interest when you need the money.
Before you run out and apply for a new home equity loan, you should consider all of your alternatives. Remember that your home will serve as loan collateral and if you default on the loan you could be foreclosed on by the home equity lender. Also make sure you can afford an extra loan payment.
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