Borrow Money In 2021 By Using Your Home Equity!
Do you know that one of the easiest ways to borrow money if you are a homeowner is to use your home equity? Yes, this is true! This is because homeowners who were able to build a significant amount of home equity are perceived by lenders as more trustworthy and financially stable. More so, being a homeowner means that you can use your home equity as collateral for a loan.
Building Home Equity
If you have been paying a mortgage for quite some time, you have probably built up a sizable amount of home equity. The more you pay towards your mortgage, the faster and bigger you make your home equity. Another way of building your home equity is by improving your home through small projects that increase the home’s market value.
Estimating Home Equity
As a rule of thumb, an easy way to estimate home equity is by subtracting all home liabilities or debts from the professionally assessed current market value of the property. If the property was assessed to be worth $900,000 and debts on the property amount to $150,000, then it can be safe to say that the home equity is around $750,000 give or take a few thousand. The bigger your home equity is, the more attractive you become to lenders. Remember that lenders want borrowers who are most likely to be able to repay loans.
Borrow Money In 2021 By Using Your Home Equity
Once you have established that you have enough home equity to use as leverage for borrowing money, you can use that to apply for a home equity loan. With a home equity loan, you can get a new car, consolidate your debt, pay for needed or wanted home renovation projects, fund your child’s education, invest more into your business, choose to get a second home, and more. Basically, you can use home equity for anything that would require a significant amount of cash that you cannot cover by savings alone.
You can choose to access your home equity in a number of ways with various types of home equity loans such as a second mortgage or a HELOC.
Applying for a second mortgage will give you access to a lump sum that you will have to pay over a fixed length of time with a predetermined monthly rate. This can give you the most predictability although this option can be difficult to manage if you end up having financial difficulties later on as you still have to pay your fixed monthly payments. The beauty of this is that there is so much you can do with a lump sum of cash including things that can help you gain financial freedom in the future.
Applying for a HELOC is a popular option for a home equity loan because it is friendlier on the wallet. It can be easier to manage too for those who have recurring expenses such as expensive treatments or tuition because instead of a lump sum, it gives you a line of credit from which you can withdraw as little or as much as you want. A HELOC only charges you interest for the money that you take out at any given time so if you end up not withdrawing too much, then you don’t have to pay much either.
Know that each option for a home equity loan has pros and cons that need to be weighed carefully. Contact us if you need professional assistance to borrow money using your home equity.