Once you’ve built a substantial amount of equity in your home, you may find there are many good reasons to consider taking out a home equity loan. With these types of loans, most people borrow a lump sum to fund one or more major expenses. For instance, you can obtain the necessary capital for a variety of expenses from home improvement projects to educational costs.
Taking out this type of loan isn’t the right approach in every circumstance, but below are three typical scenarios for which these loans can be a good solution.
1. Home Improvement Costs Financing necessary repairs to your home is one of the best reasons to take out a home equity loan. Using your funds to pay for home repairs is a great investment, especially if the repairs are absolutely necessary, such as fixing a leaky roof.
Tapping into your home equity can also be a good idea if you plan to add significant value to your home. That might mean increasing your square footage by adding a new room or remodeling larger spaces, such as a kitchen or a basement. Just be cautious and ensure you have a clear picture of how long you will want to live in your home before selling it. This will help you decide how much time, effort and money you should put into any remodeling projects.
2. Unexpected Expenses
During life, challenges such as job loss and large medical bills are bound to occur. It’s perfectly fine to consider taking out a home equity loan in these situations. Such loans can be a financial lifesaver, for instance, when you lack the disposable funds to pay for surprise expenses from an unexpected illness or injury.
In these situations, a credit union can be an excellent choice for your loan. Not only do you cut down on added fees charged by banks, but you’ll also benefit from the friendly and personalized service during an already difficult time.
3. Educational Expenses
Depending on your financial situation, you may want to consider taking out a home equity loan to cover educational expenses, either for yourself or your children. Home equity loans can be a better option than a student loan, especially if the person attending school is likely to finish their education. A home equity loan can be a particularly helpful option to pay for school if you have good credit. Families with more than one child in college also enjoy the flexibility a home equity loan can offer.
For homeowners, there are a variety of situations that make these types of loans a good solution. Credit
unions are often a trusted community resource for obtaining home equity loans, thanks to their low fees and members-first approach.