Earlier this week we looked at five reasons to consider a home equity line of credit (HELOC). There are a number of positive features that a home equity loan shares with a HELOC, especially the potential tax benefit(s).
Today, we’ll look at five specific benefits of a home equity loan that not only differentiate it from a HELOC, but also make it an equally good option to consider.
1. Home improvement
According to a January 2013 study by the Joint Center for Housing Studies at Harvard University, “Foreclosed properties are being rehabilitated, sustainable home improvements are gaining popularity, [and] older homeowners are retrofitting their homes to accommodate their evolving needs.” The study also indicated that the share of improvement spending on energy-related projects increased from 23 percent in 2007 to 33 percent in 2011.
One great way to pay for these home improvements is a home equity loan.
2. Debt Consolidation
If you have a number of credit cards with outstanding balances, a home equity loan is a great way to pay off those debts in one location. And, again, there can be tax benefits to paying interest on a home equity loan that do not exist for paying credit cards. Please speak with your trusted tax adviser for more information about the benefits of utilizing home equity.
3. Fixed Rate
Many HELOCs have a variable interest rate (meaning the rate can adjust periodically throughout the life of the credit being open). With a home equity loan, the interest rate on the obligation would be fixed for term. This can be a credit risk, however; rates can go up and down. But having a fixed rate for the entire term of the note can provide peace of mind.
4. Fixed Term
For many, borrowing a specific amount of money for a specific amount of time is a more appropriate scenario. Knowing the number of payments you’ll make to pay off the loan can make planning for future expenses easier as well.
5. Keep Your Savings
It’s hard to build a savings account balance these days. And, as a homeowner, you are also actively increasing your personal net worth by growing the available equity you have in your home. When a major purchase or life event creates a need for available money, you can utilize one of those two assets to help cover those significant costs when they arise.
For more information about home equity loans and lines of credit at Popular Community Bank, click here.