The value of your home equity increases as the years pass by. While a lot of homeowners know about the benefits that it can offer, many are still unaware of its potential. A lot of people, especially those who are also a homeowner, struggle to find an additional source of funds for their daily expenses and essential needs not knowing that they can tap their home equity to convert it into a large sum of cash and use it for whatever reasons.
If you are a homeowner for many years now and you still have no idea what is home equity and what is it for you, then read on below to know the benefits of having a large home equity value.
What is Home Equity?
Let’s say your current home market value to $200,000, and your running balance from your mortgage loan is $150,000; the equity value of your home would be $50,000. Home equity is the difference between your home’s current market value and your running balance from your mortgage loan.
What is a Home Equity Loan?
There are two types of Home equity mortgage loan. The first and the most famous one is called Home Equity Loan or (HEL). This type of home equity loan texas allows you to loan an amount equivalent to 85 percent of your current home equity value.
Once you are approved for the loan, the lender will you the amount in full. Home Equity Line of Credit or (HELOC), on the other hand, also allows you to loan the same amount, but the lender will deposit the amount directly to your bank account.
The difference between these two home equity loan texas is that HEL comes with the fixed-rate interest while HELOC interest rate might go up or down over time depending on the current economy of your state. Also, HEL offers up to 30 years repayment terms while HELOC only allow up to 10 years.
Where can you Use the Money from your Home Equity Loan?
There are lots of ways you can do for the money you receive from your Home Equity Loan, and below are just some of them.
Home Improvement Projects. It is the common reason why a lot of homeowners apply for HEL or HELOC. If you are aiming to beautify your home but short on budget, then tapping your home equity is the answer to your problem.
You are opening a New Business. If you are an entrepreneur or someone that is wanting to venture the business industry but don’t have enough funds to start a business, then you can also tap your home equity and use the money as your starting capital.
Education. If you want to pursue a degree in college or you want to support the schooling expenses of your loved one, then home equity loan is a good source.
What is the Risk of Home Equity Loan?
Similar to any other type of mortgage loan, there is always a risk, and for Home equity loan and HELOC, you are risking your home as collateral for the loan. However, as long as you won’t fail to pay your monthly dues and obligations, then there is nothing to worry about.