When it comes to financing your home, there are many options, each with its pros and cons. However, if you’re looking to invest in some home improvements, from painting to putting in new floors, one option may be more beneficial than others—a home equity loan. Find out the many benefits of financing your home improvement project through a home equity loan.
1. You Get One Low-Interest Rate Across Your Entire Loan
Home equity loans often have lower interest rates than other types of loans, making them an attractive option for homeowners financing a home improvement project. With a home equity loan, you also benefit from only making one monthly payment, as opposed to multiple payments to different lenders. That can save you both time and money.
The annual percentage rate (APR) on typical home equity loans is around 5%, which is usually much lower than that of credit cards or most mortgages. However, reputable lenders may offer low rates on home loans, as low as 3.5% APR. In addition, because your property can act as collateral in this type of loan, you don’t need to worry about going into debt if something goes wrong with the investment – all you’ll lose is the value of your house.
2. Repayments are Over Years vs Short Term Personal Loan Repayments
One of the main benefits of using a home equity loan to finance your home improvement project is that you will have a much more extended repayment than a short-term personal loan. That means your monthly payments will be lower, making it easier to afford the necessary repairs or upgrades.
Additionally, the interest rate on a home equity loan is usually lower than the rate on a personal loan, saving you money in the long run. With this type of loan, homeowners can also make monthly payments on an interest-only basis until they decide to repay the principal, at which point they would start paying off both interest and principal.
3. You Can Also Use a Home Equity Loan for Anything You Want
A home equity loan is a great way to finance your home improvement projects because it offers several benefits. However, you can also use your home equity loan to meet other needs. For example, you can use your home loan to take kids to school, cover medical expenses or handle an emergency car repair.
Also, you could use this loan to pay off high-interest debt, like credit cards and car loans, or consolidate them into one low-interest rate loan with a fixed monthly payment. In that case, you may want to consolidate debt by using the money from the home equity loan as a down payment on another investment property or even start a business.
4. You Can Borrow Up to 80% of the Value of Your Home and No Closing Costs
A home equity loan is a great way to finance your home improvement project because you can borrow up to 80% of the value of your home. That means you can get the money you need without putting up any other collateral.
However, your rates depend on your credit score and loan terms. Hence, you can finance a home improvement project even if you have an imperfect credit history or have not been in the workforce for some time. Another great thing about home equity loans is that there are no closing costs. That can save you a lot of money, especially if you take out a large loan.
A home equity loan is a great way to finance your home improvement projects. You can get the money you need without resorting to an expensive, high-interest credit card or mortgage. Plus, because your property secures it, it’s a low-risk option for lenders, which means you can borrow more than other types of loans. All these advantages, plus the ability to use the equity in your home as collateral, make home equity loans one of the best ways to finance your next home improvement project.