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Why you should use home equity to make home repairs

Interest on a home equity loan that was used to make qualified household repairs may be tax deductible.

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As the weather warms, many potential home buyers use it The spring and summer months are for looking for a new home. Inventory is usually stronger in the spring, giving buyers More options to choose from – and easier steps than to endure them in the winter.

However, spring is not only beneficial for potential buyers. Current homeowners can also take advantage of seasonality to make home repairs. This can take the form of emergency repairs or more extensive home improvements and renovations that were previously delayed.

There are multiple ways to pay for these repairs, starting with savings per personal loan And Credit card. Homeowners, however, should strongly consider using their home equity to make home repairs. This can be done initially with a Home equity loan or a Home Equity Line of Credit (HELOC). There are multiple benefits of paying for home repairs this way, three of which we will explore in this article.

If you think you could benefit from using your home equity, start exploring your options here now.

Why you should use home equity to make home repairs

Here are three reasons why homeowners should use their home equity to make home repairs.

It can be tax-deductible

Unlike other forms of credit, both Home equity loan And Home equity line of credit Their interest is deductible from your annual taxes if used for eligible home repairs and improvements.

“Home equity loan interest and lines of credit are deductible only when the borrowed funds are used to purchase, construct, or substantially improve the taxpayer’s home that secures the loan.” The IRS Explains “the loan must be secured by the taxpayer’s principal home or second home (qualified residence) and meet other requirements.”

While the interest rates on these types of loans are generally lower than many options, if you’re withdrawing equity for several thousand dollars, the interest paid can still be substantial. Then, it would be convenient to deduct it from your taxes as opposed to using a credit card, whose interest the user would have to deal with directly.

If you’re looking to make major home repairs, start by exploring your equity options now.

It comes with low interest rates

With interest rates seemingly high on everything from mortgages to credit cards, it can seem like there are no viable options to help make ends meet. but Home equity loan And HELOCs Usually come with lower interest rates. Assuming you have one Good credit score And a clean credit history you can secure one of these credit options at 7% interest rate, approx. Compare that to a credit card at 20% and a personal loan at 10%, and it’s easy to see how much more you can save depending on the equity you’ve built up in your home.

Just be sure to shop around. While you may be able to get the best terms and rates with your current lender, you don’t have to use them when accessing home equity. It is possible that another organization may offer you more favorable terms. So research multiple lenders before signing on the dotted line.

Can work with you more

If you live in any part of the country Where house prices have increased Then you can be sitting on a substantial amount of equity that you can use to make home repairs and improvements. Compared to the limited amount of money you’ll be able to get through a credit card or personal loan, you may have to do more work around your home instead. Most lenders will let you borrow up to 80% of your home equity, which means you could qualify for thousands (if not hundreds) of dollars to fix up your home. So, if you’re looking for a stronger financing option, a home equity loan or HELOC may be worth it.

Bottom line

If you’re looking to complete major renovations or home repairs this spring and summer, be sure to review all of your credit options first. It’s possible that you can get a better rate and terms for a personal loan or line of credit, but chances are you’ll be able to get a better deal using your home equity. A HELOC or home equity loan can be tax-deductible if used for qualified improvements, and both typically come with lower interest rates than other popular credit products. And if you live in a part of the country that has experienced rising real estate prices, you may have a lot more money to play with if you apply for a different type of credit.

Check out all your HELOC and home equity loan options now here or in the table below to see if it makes sense for your next home repair.

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