Published on November 08, 2018
Use equity to reinvest in your current home
Fall in Michigan is an especially beautiful time of year, but the cooler weather means spending more time indoors. We start to notice the parts of our house that have lost their shine, especially when HGTV is on all weekend. Your daydreams about more space, a new kitchen, or bigger closets, are interrupted by a voice of reason who offers a rebuttal to each wish. If you’re having a hard time thinking of selling your home, it might be time to think of some alternatives.
If you decide it’s not the right time to move, what can you do today to prepare for a move in the future, or rekindle your love for your home? Consider utilizing the equity in your home. If you have lived in your home for 5 – 7 years, chances are you’ve started to build equity. Think of equity as money you’ve been depositing into your “home savings account.” You’ve been making your monthly payment and are finally beyond the point of making payments painstakingly applied to just the interest.
Instead of moving because you envision something better, reinvest in your current home. Is it possible to achieve your dream kitchen or bigger closets by making updates to your current home? Not only will you get what you’re hoping to find in a new house, but the renovations could increase the value of your existing home. Your future self will thank you!
Another thing your future self will thank you for is eliminating debt. If you have medical expenses, student loans, credit cards with high balances and interest rates, considering using money from the equity of your home to pay these things off. Debt to income ratios play a big role in getting approved for a mortgage.
Today’s home equity loans come a range of different features and benefits designed to help the consumer achieve exactly what’s right for them. Here are two examples:
Home Equity Line of Credit
Home Equity Line of Credit (HELOCs) are designed to provide consumers with cash. Think of this type as a credit card. Once you’re approved for a certain amount you only pay back what you spend, the spending limit doesn’t change. These are great for re-models or upcoming expenses.
Home Equity Loans
Home Equity Loans are paid to the borrower in a lump sum. The interest rate and monthly payment are typically fixed, and you start making payments immediately, regardless of whether you have spent the money yet. This type of loan is great for tuition bills, debt consolidation or weddings.
Of course, it never hurts to get a second opinion. Whether you decide to love it or list it, check with a financial planner. As a neutral party they will be able to help you talk through your decision, without having an emotional connection, helping you decide what’s best for you and your family. They’ll challenge you to think about what your goals are and will work with you to accomplish them.
Jon Cousins has 30 years of experience helping people with their mortgage and commercial lending needs. He is currently employed by Community Choice Credit Union as a Mortgage and Business Advisor, and focuses on helping people achieve their dreams.
Article courtesy of Jackson Magazine.