Owning a home is part of the American Dream. Your home is not only a valuable asset, it can also be a powerful financial tool if used correctly. With home prices on the rise, homeowners are finding that a home equity loan (also known as a second mortgage) can be a great source of extra cash at a reasonable interest rate. But proceed with caution; borrowing from your home’s value carelessly could be risky if you don’t have a good reason or a solid plan.
If you’re thinking about taking out a home equity loan or line of credit, here are four smart ways to tap into this extra cash the right way:
1. Home improvement projects. Home equity loans and lines of credit are great to use on upgrades that could potentially raise the value of your home. Remodeling your kitchen or upgrading the exterior siding can give your home the much-needed boost it needs if you plan to sell it now or in the future. Certain energy-efficient upgrades are also beneficial for tax purposes and lower energy bills. If you are selling, we encourage you to forego spending your equity on pools or other luxury upgrades, focusing instead on smart, practical improvements.
2. Emergency expenses. No one can really prepare for unforeseen emergency expenses such as large medical bills or a job loss. However, using your home’s equity to cover these costs is a very reasonable approach in a financial crunch. This is also a great option if you don’t want to drain your savings. Plan ahead and consider getting approved for a Home Equity Line of Credit (HELOC) before a financial emergency arises. With a Telhio HELOC, you don’t have to borrow from it (or make payments) until you really need it.
3. Education. They say college can be the best four years of your life (unless you’re drowning in debt from tuition and added expenses). Using your home equity to pay for your child’s tuition usually comes with lower interest rates than federal or private student loans. Just be careful that you’re not sacrificing your own retirement or future nest-egg to fund your child’s education.
4. Pay off high-interest debts. Borrowing from your home equity could help you consolidate high-interest debt, which can save you a lot of money in the long run. A home equity loan can not only help pay your debt off faster, it can also make it easier to manage. The money you save in interest can then be used to pay down the principal, making it a much more attractive option for many.
Learn more about Telhio by visiting telhio.org.
Telhio Credit Union is open to anyone who lives, works, worships or goes to school in Franklin, Fairfield, Delaware, Licking,Madison, Pickaway, Union, Hamilton, Warren, Butler and Preble counties. Founded in 1934, originally as the credit union for the Columbus Telephone Co., Telhio is a not-for-profit financial cooperative where its members are also its owners. Driven by its philosophy that members come first, Telhio is committed to the highest standards of responsibility and conduct. Telhio offers a variety of innovative programs, services and products to support its members’ financial needs. Telhio offers 10 branching offices throughout Central and Southwestern Ohio and nearly 4,000 shared branching locations nationwide. Federally insured by NCUA. Equal Housing Lender. NMLS #251831
