PROUDLY CANADIAN
The term equity is used to describe the amount of value you have in the home after making mortgage payments. With the equity you have in your home, you can use the value to obtain a loan that can be used for a number of reasons from home repairs to additions. With a home equity line of credit, you can have a low monthly payment and use the money how you see fit. But what are the best ways to use the money and what are the worst? Below are a few common examples of how individuals use their equity, some good and some not so good!
The Good
One of the best ways to make use of home equity is with home improvements. You can build more equity in your home by using the money to make an addition on the property or to upgrade the kitchen or energy efficiency of the home. By using the money in this manner, you are building upon the value of your home.
Consolidating debt is another great use of home equity. You can take control of your personal debt by using the money from your home equity to pay off high interest credit card debt, additional loans, etc. You will have one monthly payment in place and a lower interest rate to help you save money and take care of your debt at the very same time!
Investing in additional property is another way to use your home equity. You can take the value you have in your home and invest in another property. This investment can be considered for rental income or to be sold after renovations.
The Not So Good
While there are good ways to use the money there are also not so good ways to using home equity. Many people like to use the money to purchase a new car but this is not always the smartest decision. With a new vehicle, it begins to lose value the moment you drive it off the lot. Another factor to consider is that if you default on the loan you will lose your car as well as your home. With a standard auto loan, only your car is at risk if default takes place.
Taking a vacation is another common use of home equity and not necessarily the smartest decision. While it is always nice to go on vacation, it is not usually the best way to use your equity. Instead of using your home equity, take out a traditional line of credit to go on vacation or choose an inexpensive destination to avoid using your home equity in this manner.
These are just a few examples of how you should and should not use your home equity. Consult with Mortgage Guys when considering using the equity in your home to make an informed decision as well as have access to the best rates and terms. Mortgage Guys has years of experience in the industry and can easily assist you with obtaining an equity line of credit.