With the cost of so many essentials rising quickly, people everywhere are scrambling to get their finances in order. The necessities and milestones of life don’t just remain paused just because they get more expensive.
If you’re a homeowner looking for a path toward financial stabilization, read on to learn how you can draw on your home’s value.
A home equity line of credit, or HELOC, lets borrowers access a line of credit by using their home as collateral. Since they have a property to stake the claim against, the loan on home equity tends to be favorable — you’ll get a much better rate than you would if you simply walked into the bank.
Life requires some big purchases sometimes, from vacations, vehicles, renovations, or investments. Most people don’t have spare cash lying around, so they tap their home’s equity by using a HELOC.
People shouldn’t be left without a path to improve their finances, even, or maybe especially, if they’ve been denied a loan from the bank. A professional mortgage broker can help people of all credit, debt, and income levels get on sturdier footing.
Home Equity Loan
A home equity loan is like a HELOC, except the borrower receives one lump payment. A home equity loan can be perfect when you know there’s a lump sum you’ll need. For example, if you need to make car payments, they’re usually predictable and fixed.
In contrast, a home renovation that might be more open-ended may be better suited to a HELOC. However, you want to be careful. As interest rates rise, your mortgage may become more expensive, and you don’t want that sudden increase to make the costs unbearable.
Tapping your home’s equity can be an important way to raise funds quickly. However, if you aren’t careful and fail to make repayments, you can potentially lose your home.
Second mortgages can be an excellent way for homeowners to leverage their existing equity. Look for a professional, licensed broker to get the highest loan-to-value ratio possible.
Most lenders manage to get you only 80%, but the top ones will approve 85% or even 90%! To put this into perspective, if the home costs $1,000,000, the extra 5% means an additional $50,000 in your pocket, while 10% means $100,000.
Using your home as collateral usually speeds up the process, so you can get access to substantial money in a hurry. The timing might be extra important. If you get a leak in the basement and need to do some emergency repairs, you won’t want to dawdle!
Finally, the best brokers can make the repayment plan flexible and comfortable for you. Even people with little to no income can structure payments to reflect what they can afford.
Everybody has essentials in life to buy, from weekly groceries to education payments and more. However, we each have unique lives, and no two people’s finances are exactly alike. Speak to a professional broker near you to see which of the above routes makes the most sense for you.