Home Equity Loans: When Are They Right for You?
Even when you find that perfect home, there may still be things you want to change. As you and your home get more and more time together, those desired renovations might start to add up in number and cost. A new kitchen with granite countertops, hardwood floors throughout, that dreamy soaking tub… The list can get long pretty quickly.
Unfortunately, you may not always have the cash on hand to complete the renovations you need or want. Perhaps you just have enough for your down payment or you’ve already invested in the home. It may seem the only option is to take out a high-interest rate personal loan or to put improvements on a credit card. Thankfully, there are other options.
When faced with renovations, Florida homeowners can apply for a home equity loan to cover the costs and make improvements.
In this article, we’re going to go over what a home equity loan is and why it might be worth it to you. Plus, we’ll share what to watch out for and how to get one. When you have changes you’d like to make but don’t know where to start, the best bet for you might be a home equity loan.
What is a Home Equity Loan?
A home equity loan is considered to be like a second mortgage. A home equity loan requires that you put your home as collateral to secure the loan, and it allows you to access the equity you’ve built up in your home.
For example, let’s say you put down a 20% deposit on a $300,000 home and have paid off another $20,000 overtime. That means you’ve paid $80,000 towards the home. A home equity loan would allow you to access a portion of that $80,000 that you’ve put towards your home so you can make home improvements. You can also choose to use the funds for other non-house related expenses like tuition for a child’s education.
Alternatively, you can also apply for a home equity loan line of credit. With this loan offer, instead of taking out a lump sum and having a fixed rate loan repayment plan, you can access capital as you need it and pay it back with an adjustable interest rate. In this sense, it’s similar to a credit card. If you are working on your home and are doing the work yourself, this option may be helpful so that you can pay for supplies as you need them rather than taking out a large sum at once and entering into repayment immediately.
If you don’t feel like a home equity loan is a good fit for you, you can also look into a personal loan or to refinance your home. Speak with a qualified loan broker to find your best options.
When is a Home Equity Loan Worth It?
There are two situations where a home equity loan may be worth it for you. One, you may just really want to remodel your home. If you know a change is going to be needed to make the home perfect, it may be worth it to find a lender who offers a home equity loan. The lender can also help explain other options you may have based on your personal situation.
If you need to remodel your home to address an issue that might one day bring down the value of your property, then you may want to renovate sooner rather than later. In most cases, a renovation is more of a choice than a necessity. Still, there might be changes you need to make to avoid an issue down the road. Plumbing renovations, HVAC replacements, or roofing replacements are great examples of instances where taking out a home equity or personal loan may be worth avoiding damage down the road.
Home Equity Loan: What to Watch Out For
As with any loan, it’s important that you consider how you will pay it off. With a home equity loan, your home is used as collateral to secure the loan. Make sure you can make your monthly payments so you don’t put your home in jeopardy.
When signing up for a loan, read the terms carefully. It’s crucial that you understand the difference between a fixed-rate loan and an adjustable-rate mortgage (ARM). You don’t want to be surprised by higher payments down the road—take the time to understand what you’re agreeing to.
Before applying for a Home Equity Loan, consider getting quotes for your desired renovations. This will better help you understand how much you need and whether the loan will be enough to cover the costs of the fixes you desire. If they don’t, you’ll need to think about whether the renovations are really needed or whether it’s a better idea to seek another property.
How to Get a Home Equity Loan
A mortgage broker like Associates Home Loan can help you find the right loan for your needs. Whether you want a mortgage that helps you cover renovation costs, need to refinance, or are opting to secure a personal or home equity loan to cover improvements to your property, a mortgage broker can help you find the best rates so you can choose a loan that works with your budget. Whatever your financial situation, we can help you understand your options so you can move forward with confidence.
Ready for a Home Equity Loan? Contact the Experts at The Associates Home Loan of Florida
If you’re ready to take out a home equity loan or refinance your mortgage on your Florida property, then the team at the Associates Home Loan of Florida is here to help.
At Associates Home Loan, we help our clients think outside of the box. We can provide you with a variety of options that fit your situation. We specialize in alternative lending resources and flexible underwriting guidelines.
Ready to find out more? Visit our website, or call (813) 328-3632.