What Are Home Equity Loans Used For?
Many consumers are aware of what a first mortgage is when they buy or refinance their home. There are 2nd mortgages which can be placed behind the first mortgage to tap into the equity of the home. These are especially popular right now as many homeowners have a very low fixed rate on their first mortgage with rates hitting their all-time lows in the past few years.
Second mortgages allow you to borrow up to 80 – 85% of your home’s value which would include your first mortgage balance. As an example, let’s say your home is worth $250,000 and you have a first mortgage balance of $150,000
These second mortgages can either be a fixed rate (closed end) or variable rate (home equity line of credit). What can you do with the equity regardless of what form you take it in? Here are a few common uses for a home equity:
• Remodeling your home
• Paying for a child’s college tuition
• Consolidating debt
• Purchasing a 2nd home or investment property
• Starting a new business
• Starting a rainy-day fund
The point is you can do whatever you want to do with the money. A bank, credit union or mortgage lender really don’t care what you do with the money if you make payments on time. So, if you wanted to invest some in the stock market or purchase a new car, you could do that.
As always, be sure you are working with a trusted lender and financial advisor so you can make the best and right choice for yourself. Talk to the Home Loan Advisors at Hall Financial to learn more about home equity loans.