Owning a home certainly has its perks, and building equity is one of the most lucrative ways you can benefit.
If you're considering a home equity loan, it's important to find one that will suit your unique needs.
Read on to learn how to get equity loans that will work for your goals, your dreams, and your future.
You can think of a HELOC like a loan that works similar to a credit card. You only have to take out what you need during a specific period of time, so you'll only pay interest on the amount you borrow.
Another bonus to the HELOC is that as you repay the money you borrowed, you're putting the equity right back in so you can use it again later if you need to. Think of a HELOC as a way to get money to pay for things like repairs, renovations, and even to pay off high-interest credit cards. This type of home equity loan works well for those who only need a specific amount of money at any given time.
As time goes on and you've built up equity in your home, you can get some of that back in the form of cash with a cash-out refinance. This type of loan lets you borrow a set amount of money against the equity in the home through refinancing into a larger loan.
The idea behind a cash-out refi is that you combine the borrowed amount of equity with your current principal on the mortgage. This process makes everything more streamlined, and you'll only need to pay back one lien instead of two. As you pay the new mortgage payments, you're also paying back the debt incurred from the cash-out amount.
Earning equity is a result of your hard work and willingness to repay your mortgage. So, how to get equity loans that will work to your advantage?
You may wonder if you can deduct the interest paid on your home equity loans on your taxes. The answer is yes, but certain restrictions apply. The interest you deduct must be from loans used to pay for something directly related to your home. (Readers having legal or tax questions are urged to obtain advice from their professional legal or tax advisors.)
If you took out a home equity loan to pay off other debts or buy a car, you won't be able to deduct any interest paid on your tax return. That doesn't mean that home equity loans aren't beneficial. If you're in a financial pinch or need extra money, these loans are still extremely beneficial and typically provide lower interest rates than other loans.
Now that you know how to get equity to work for you, it's easier to decide which type of loan will fit your needs. A HELOC is an easy way to get just the right amount of money you need for smaller expenses or renovations.
If you prefer to take out all the equity you've earned so far, a cash-out refinance might be best. Talk to a tax professional about deducting the interest you pay on these loans for your return.
Check out our website to compare lenders all in one place, and be sure to contact us with any questions so we can help you get the most out of your home.