If you own a home, and you have paid off a percentage of your mortgage, you may be eligible for a home equity loan. A home equity loan is designed so that you can borrow against the difference of your home's current market value and the amount you still owe on your mortgage. As an example, if your home is worth $100,000 and you still owe $30,000 in mortgage payments, you have built up $70,000 in equity in your home that you can borrow against. If you borrow against the equity in your home, make sure that you use it for a purpose that will strengthen your financial situations. Here are three smart ways to use a home equity loan.
#1 Improvements To Your Home
One of the most common and best ways to use a home equity loan is by investing the money back into your home. However, you need to make sure that the way that you are investing in your will increase the market value of your home. Often time, small maintenance tasks around your home, such as fixing a leaking faucet or patching your roof, will not increase the value of your home, they will just help you retain the current value of your home.
In order to increase your value of your home, you need to make smart upgrades to your home. Upgrading the countertops and flooring in your kitchen from laminate to stone could greatly increase the value of your home. Or adding square footage to your home could also increase the value of your home. Consult with a real estate expert and make sure that the improvements you want to make will increase the value of your home before you take out a home equity loan.
#2 Consolidation Of Debt
Consolidating your debt is also a smart way to use a home equity loan. Carrying balances on multiple credit cards, as well as carrying balances on multiple loans, can really bring down your credit score and can put you in a tight position money wise. Paying off and consolidating all your debt into a single loan can improve your credit score and can make it easier for you to manage your payments.
This is a smart choice if you can commit to not running up any additional debt. If you can pay off and eliminate your debt with the assistance of a home equity loan, this can be a smart move.
#3 Career Advancement
Finally, another smart way to use a home equity loan is by investing in your career. By pursuing college, an advanced degree or further certification in your field, you can increase your earning potential. Before you spend a home equity loan this way, make sure that the degrees or certifications you want to pursue will actually lead to additional opportunities in your chosen career field.
If you want to take out a home equity loan, make sure that whatever you invest the money in will improve your overall financial life.Share