If you’re looking for ways to build wealth, you may want to consider a home equity loan, also known as a second mortgage.
With this type of loan, you use your home as collateral. Home equity loans come with fixed low-interest rates, a fixed repayment timeline, and fixed monthly payments.
Here are the best ways to use your home equity to your advantage.
- Paying off credit card bills or other debts
If you transfer high-interest credit card bills to a home equity loan with a rate that’s less than a third of what you’re paying on your credit cards, you could save money and pay down debt faster. And don’t forget you can use home equity to consolidate other types of debts. The key is choosing debts that have a higher interest rate than you could get with a home equity loan.
- Home improvements
Many consumers use home equity loans to make important home improvements or upgrades. You’re using your home equity to improve your property, which should in turn boost the value of your house. Also note that if you qualify according to IRS rules, you can deduct the interest on home equity loans when the funds are used to “buy, build or substantially improve the taxpayer’s home that secures the loan.”
- Down payment for an investment property
If you are angling to become a landlord or purchase commercial property, you can expect to fork over a big down payment. Instead of tapping into your personal savings, you could use your home equity to get the cash you need. Since home equity loans are secured by the value of your property, they often offer the most competitive interest rate you’ll qualify for.
- Starting a business
You can also tap into home equity to start a business, whether that’s opening a franchise or opening your own company from scratch. A home equity loan can help you access a large amount of money at once without tapping into your personal savings or taking out a pricey small business loan.
If you’re interested in opening a home equity loan, our experts are ready to help! Give us a call or visit any branch.