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Benefits of using your home equity, according to professionals

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By using your home equity, you can get the funds you need at a significantly lower rate than other financing options.

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Owning a home is often considered a good investment. By making your mortgage payments each month, you build value in size Home is equal, which you can cash in when you sell your home. But it can also be a cost-effective source of product financing Home equity loan And Home Equity Lines of Credit (HELOCs).

“In the right circumstances, a home equity loan or a HELOC can be a helpful tool to have in your tool belt,” says Tyler Gray, CFP, managing director of Sage Oak Financial. “For many people, their home is their biggest asset, so having a way to tap into that equity without having to sell the property can be really attractive.”

If you’re considering borrowing against your home equity, it helps to know the benefits so you can make an informed decision. We spoke to some experts for their take.

Explore your home equity options online now to see what rate you qualify for

Benefits of using your home equity, according to professionals

Provides tap into your home equity Many benefits. Here’s what experts say can help you

low rate

“Home equity loans and HELOCs are secured loans because the equity in your home backs them,” says Matt Teifke, founder and principal broker at Teifke Real Estate. “This makes them more attractive to lenders because they have a lower risk of default than unsecured loans like credit cards or personal loans. remains.”

Because of this low risk, lenders are willing to offer competitive rates for these products. “Home equity is typically one of the cheapest sources of debt compared to other options such as credit cards,” says Noah Damsky, CFA and principal at Marina Wealth Advisors.

For example, credit card interest rates currently average 20.55%, according to Bankrate. current rate For home equity loans and HELOCs, on the other hand, range from 8.35% to 8.63%.

Check today’s top home equity rates here.

Unlimited usage

You can use a home equity loan or HELOC For what you want. Includes popular usage home improvement, Debt consolidation And Building retirement income.

But there’s one use you might not be familiar with that could come in handy: bridge financing.

John Boyd, CFP, chief wealth advisor at MDRN Wealth, explains, “If you’re considering a move but lack immediate capital, tapping into your home equity can provide the funds you need. This option allows you to bridge the financial gap between selling.” Lets do. Your current home and buying a new one.”

Denny Supley, realtor and co-founder of SparkRental, points out another unique way to use your home equity: “Adding an accessory dwelling unit to rent out and hack the house. In fact, if you find a way to hack the house and rent to someone else Let’s cover your housing payment, they pay off your mortgage balance(s) for you. Your equity grows and it doesn’t cost you a dime.”

Compare home equity offers today to find the right product for you.

A large sum of money

“Home equity loans and HELOCs provide access to substantial amounts of money, especially for homeowners who have diligently built equity over time,” says Mike Cue, real estate agent and owner of Good As Sold Home Buyers. “This type of loan is especially useful when undertaking major projects, such as home renovations or additions, where costs are greater than would normally be covered by a personal loan or credit card.”

Lenders usually allow you to borrow Up to 85% Your home equity, which can amount to hundreds of thousands of dollars. By comparison, credit card limits typically range from $1,000 to $2,500.

Find out how much you can borrow here.

Potential tax benefits

Depending on how you use your home equity funds, a home equity loan or HELOC can “provide tax-advantaged debt compared to auto or credit card debt,” says Damsky.

In particular, if you used the funds for an IRS-approved home improvement, you may be eligible Deduct interest Come tax time. This is something you won’t find with other common financing options.

Potential for home value to increase

In addition to qualifying for tax benefits, using your home equity to pay for home repairs and renovations can also increase your home’s value.

“Home equity can serve as a valuable source of liquidity for home renovations and improvements,” says Boyd. “By using your home equity wisely, you can invest in improving your property. This approach has the potential to increase your home’s value over time, benefiting you both aesthetically and financially.”

Home improvement that Increase the value of your home Include kitchen and bathroom updates, build a new addition and update your HVAC system.

Thinking of using your home equity? See which products you qualify for here.

Bottom line

While there are many benefits to using your home equity, this one stands out Financial decisions That should not be taken lightly.

“It’s essential to be careful when using home equity. It shouldn’t be treated like another credit card,” says Boyd. “Responsible use is critical, as misuse can have serious consequences, including the risk of losing your home. It’s important to avoid reckless behavior and approach home equity with a thoughtful and strategic mindset.”

That said, right chooses Home equity products By borrowing for you and only what you need, you can get the funds you need at rates significantly lower than other financing options. When in doubt, consult a financial advisor for guidance customized to your situation.

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