Monthly Archives: January 2019

5 Most Common Ways To Use Home Equity Loans

mortgage

If you’re able to acquire your home thanks to mortgage loans, then you’d be delighted to learn that you can put your home equity to work. More homeowners are taking advantage of their home equities, using it as a potential source of extra money. This is made possible through Home Equity Loans.

Home Equity Loans comes in two forms – Cash Out and HELOCs. In Texas, HELOCs or Home Equity Lines of Credits, are also known as second mortgage Texas. Home Equity Loans allows you to tap into your home’s equity so you can use it for different reasons. Most homeowners commonly use their equity to fund several other endeavors including the following.

For Debt Consolidation

Many homeowners resort to second mortgages in hopes of paying off existing loans such as credit card balances, student loans or car debts. This what financial experts call consolidating debt which is a form debt used to pay off other loans. The great thing about using a home equity loan to consolidate debt is that it can lower monthly debt dues thus simplifying the repayment process. One must be cautious when using a second mortgage to consolidate debt, or else you’re putting your home at risk if you won’t be able to pay it off in the end.

For Home Improvement Projects

Some homeowners wish to use their home’s equity to pay for necessary home repairs and maintenance. However, there are also some who acquires home equity loans to have enough money to improve their home in hopes of selling their house for a more substantial amount. If you do plan on a second mortgage to pay for home improvements, make sure to go for projects that have a high return on investment to make the most out of your loan.

For Investments

Some use the money they can get out of home equity loans for investment such as the stock market and the like. What they fail to realize is there is no guarantee when it comes to how the stock market will perform and if you’ll be able to grow your money or not. If you do engage in the stock market, remember not to put all investments in one basket. Financial management is essential when it comes to any kinds of loans.

For Recreation

Many financial experts would agree that many homeowners fall for the worst reason to apply for a second mortgage. This is tapping your home equity for recreation such as taking a fancy vacation or making expensive purchases they don’t necessarily need. One needs to understand that when it comes to home equity loans, you’re signing up your home away in exchange of a goal. If your goal is to fund recreation which in no way will get your money back or more, its best to think twice before doing so.

To Fund College Education

Some homeowners tend to go for equity loans to achieve a higher education. Due to spiraling student loan debt, many resorts to home equity loans instead of other options. The reason is quite simple – second mortgages have lower interest rates than student loans. But before sealing the deal, make sure to check other options as other student loan types also offer low-interest rates.

Good Read: 10 Ways to Reduce Your Student Loan Debt

Second mortgages, like any other loan types, comes with pros and cons. The best way to handle financial matters is by managing your finances with care and thinking about the consequences before signing up your home.