Why Home Equity Loans Make a Lot of Sense

With summer well under way, many of you, especially those in areas where the weather is more adverse during the winter months, may be undertaking some of those long-overdue projects around the house.

But the cost of some larger projects like additions or remodels may prevent them from getting done.

The good news is that even with more conservative mortgage lending guidelines, using equity in your home to complete some projects could be a great idea.

Following are a few reasons why.

In the face of credit card interest rates that are at astronomical levels, tapping into a source of funding that can offer much lower rates, and interest that may be tax deductible to boot, makes a lot of sense.

Check with your tax professional for more details about your specific situation.

Home equity products come in two main types: home equity lines of credit and home equity loans.

Home equity loans, the more widely used of the two, are often of the variable-rate type and come in interest-only and amortized versions.

Rates on variable-rate loans are usually based on some economic indicator such as the prime rate.

With prime being at a historical low at this time, borrowing money for projects has never been as inexpensive as it is right now.

Home equity loans usually come with higher rates and require principal repayment each month.

Even though many homeowners may now have less equity in their homes than they used to in years past, they still have a great resource to draw on.

All in all, home equity products are a great way to go, considering some of the benefits that they offer, and should be at least looked into when considering a funding source for your next project.