Home values are on the rise and interest rates remain at historic lows. Many homeowners are taking advantage of their increase in equity to take out a second mortgage, or a home equity loan. Â It is a loan using the excess equity on your home as collateral. Most homeowners use it for major expenses such as home renovations, college education, medical bills or debt consolidation.
Advantages of Utilizing a Loan
Don’t have to refinance
Getting a home equity loan is a great way to take advantage of equity without going through the entire process of refinancing. The closing costs associated with a home equity loan are much lower than a mortgage refinance. The loan process is shorter and you’ll be closing on the mortgage much quicker.
Quick Appraisal Process
Most lenders only require a drive by appraisal for home equity loans. This appraisal costs half of what a full appraisal costs. It also makes the appraisal process much quicker.Â
Tax Deduction
The interest paid on this loan is a tax deduction. This can be a great benefit in the tax season. Each year you will receive an annual interest statement from your mortgage lender. Bring this statement with you while doing your taxes and you may find that this deduction will save you a couple hundred dollars or even more.
Lower interest rate than a personal loan.
Many homeowners do not know about the benefits of a home equity loan and get a personal loan to finance some major expenses instead. Getting a personal loan may be a quick way to get the cash you need, but it will cost you much more. The lowest personal loan interest rates are more than double home equity loan rates.
Don’t have to drain personal cash.
Utilizing this loan allows homeowners to leave their savings untouched. They can be reassured that they still have a reasonable savings account in case of emergencies. It will help fund the major expenses coming your way without depleting your savings account.
If you have some major expenses coming up, you should consider using the equity in your home to bridge that gap. Mortgage interest rates still remain at historic lows and home equity values continue to steadily rise. This is a great opportunity to lock in a low interest rate while achieving what you need financially.
