If you've been making regular mortgage payments on your home for at least a few years, there's a good chance that you've built up a fair amount of equity in your home. What some homeowners don't realize, however, is that you can actually tap into your home's equity in the form of a loan. This is known as a home equity loan. Before you decide to apply for such a loan, educate yourself on the answers to some of the most frequently asked questions by homeowners just like you.
What Can the Money Be Used For?
It's important to understand that, unlike some other types of personal loans, a home equity loan can't be used for just anything. Instead, a home equity loan is designed to be used for home improvement purposes. For example, if you've been wanting to build a deck in your backyard as a means of increasing your home's resale value and maximizing your outdoor living space, you could use a home equity loan to pay for the construction of that deck.
In many cases, home equity loans can also be used for major home repairs. For example, if a roofing inspection reveals water damage that needs to be repaired right away, a home equity loan can be a great way to finance the repairs.
Are There Any Tax Benefits Available?
One of the best things about taking out a home equity loan is that the interest on these loans is often tax deductible. The same cannot be said for many other types of consumer credit lines. Still, you'll want to carefully read the terms of your loans and speak with your lending agent about this to be sure, as there are stipulations and exceptions that some lenders have on this. If the interest on your loan is tax deductible, this could save you hundreds or even thousands of dollars over the repayment term of your home equity loan.
What Payment Options Are Offered?
Generally, there are two repayment options available when it comes to home equity loans: principal plus interest and principal only. A principal plus interest loan is the most common type of home equity loan and involves making equal monthly payments until your loan is repaid. A principal only loan, however, allows you to make your regular monthly payments in addition to optional payments. Any additional payments you place on your account go immediately towards the principal and thus allow you to pay the loan off faster with no penalty.
Contact a lender like MCS Bank for more information about home equity loans.
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