A home equity loan can be used for a number of reasons. Instead of selling, consider a home equity loan to build an addition to your current house.
Grapevine Texas House Buyers: Deciding to sell your house in today’s market may not be the best option if there is any way that you can wait. Even if the market doesn’t cause the home prices to rise much, at least you’ll have more of your mortgage paid down as time goes on. If you have equity in the house you may want to consider a home equity loan. That gives you some room to breathe if your bills are piling up due to a temporary setback. You may still want to sell, however, if your setback will be longer term and you don’t see the light at the end of the tunnel.
With equity available in your house you can borrow against it.
Home equity means the difference between what your house is worth on today’s current market and what you owe on the mortgage. For example, if your house would be worth $300k on today’s market and you owe $250k on your mortgage, your equity in the house is $50k. It doesn’t matter if you paid $420k for the house 10 years ago or not. Equity, as with most aspects of realty, is based on what you owe versus what it’s worth today. Many people are negative on their equity due to falling house values. Their mortgages don’t change no matter how far the value of their house drops. In many cases there is no equity to speak of. An example of this situation would be if you owed $100k on your house but it’s only worth $80k in today’s current market. In that case there is no equity to use.
- For example, if your house would be worth $300k on today’s market and you owe $250k on your mortgage, your equity in the house is $50k.
- It doesn’t matter if you paid $420k for the house 10 years ago or not.
- Many people are negative on their equity due to falling house values.
With equity available in your house you can borrow against it. You have something to put up for collateral. A reason to take a loan on your equity might be to pay off your higher interest credit debts. Where your credit card debt is 15% and you can borrow against your equity for 10% you can use the home equity loan to pay off the higher interest rate loans or credit cards and pay it back at a lower rate.
There are many reasons for taking out a home equity loan, some of which are to fix up the house or build an addition instead of selling and moving, using it to repair things that need to be done if you do plan to sell later, and some even use it to take a long desired vacation. Keep in mind that home equity loans are definitely loans and must be repaid along with the mortgage payment.