Home ownership is a great achievement and owning a home means that you’re building up or have already built-up equity in your home that can be used to leverage financing. Utilizing your home equity for financing can be a great financial tool. However, you want to be sure you’re leveraging your home equity for the right reasons since your home is a major financial investment.
If you’re thinking about putting your home equity to work with a Home Equity Loan or Home Equity Line of Credit (HELOC), read more about these best uses of home equity.
Value-Adding Home Improvements
If you’re thinking about renovating your kitchen, putting in a pool, creating an addition, adding a deck or doing other value-adding home improvements, a Home Equity Loan or HELOC is a great way to finance these pricey projects. If the home improvement will add value to your home in the long run, it’s usually a good use of your home equity as you are re-investing the money into your home.
Paying for College or Higher Education Tuition
These days, college and higher education tuition can be very expensive and private student loan interest rates can be high depending on your financial situation. Using a lower interest Home Equity Loan or HELOC to finance tuition payments can be a great option for some.
Financing Life Events
Getting engaged, getting married, having children and other exciting life events unfortunately can also be accompanied by a large price tag. If you have home equity, leveraging it to finance life’s big events can be a good use of it.
Handling Large Purchases
A Home Equity Loan or HELOC may have a lower interest rate and/or more favorable terms than a Personal Loan, which can make it a good option for financing large purchases that you do not have the cash on hand for.
Consolidating High Interest Debt
If you have high interest debt and you’re ready to create and stick to a plan to pay down your debt, using a lower interest Home Equity Loan or HELOC may be an option. However, you want to absolutely ensure you are committed to your debt consolidation plan and have the money to make your monthly payments before making this decision, as you do not want to get yourself into a bad situation with a loan that is tied to the value of your home.