|
|
|
|
Home
> Tips
and Tools > Common
Uses of a Home Equity Loan
 |
 |
How you can use your Home Equity Loan
A home equity loan is an attractive line of credit for
borrowers who want to upgrade their home or property,
invest in their education or business, or consolidate
high-interest debt. This loan program can improve your
financial situation—and your future—and offers
the bonus benefit of tax-deductible mortgage interest.
Consider how Ahmad used his F&M Mortgage Group home
equity loan to reduce his tax liability and create a more
secure future.
Building for the Future— A 44-year-old
carpenter, Ahmad has a reputation as a skilled craftsman,
with plenty of work to comfortably support himself and
his daughter. But like many self-employed craftsmen, he
has little saved for retirement beyond the income generated
from two rental properties and the equity in his own home,
acquired over 15 years of his 20-year mortgage.
With a $30,000 home equity loan, Ahmad upgraded his kitchen
and built an attractive workshop and storage area on his
home property. This smart move increased the property
value and reduced Ahmad’s business overhead by 18%.
The mortgage interest is bettering Ahmad’s tax situation,
and he’s investing the savings into a retirement
fund. In addition, he’s made improvements to his
rental property and as a result, nets a higher return.
He has set aside this income for his daughter’s
educational expenses.
As Ahmad’s story demonstrates, a home equity loan
is best invested in secure growth, home appreciation and
the development of comparable assets for now and the future.
When a home equity loan finances luxury items such as
cars or boats or impulsive lifestyle choices, it becomes
debt that puts your home at risk with little else to show
for it.
What could you accomplish with your F&M Mortgage Group
home equity loan?
Improve your home and its market value
Upgrade a bathroom or kitchen; give your house the new
roof and curb appeal it desperately needs. Home repairs
and upgrades that not only improve the market value, but
deliver tax savings. Though your loan will reduce your
equity, you'll develop additional equity when your repairs
and renovations increase your home's value.
It's important to identify the types of improvements that
produce the most return on your investment. New plumbing
and a new roof will preserve your home's existing value
and add to it, while a pool or gazebo offer you little
return on your equity investment. To learn more, contact
us.
Eliminate, Consolidate & Manage Debt Wisely
Eliminate credit-card debt or other high-interest burdens
with a home equity loan. The typical rate on a home equity
loan is often as much as 10-12% less than the typical
credit card interest rate, so you'll pay less interest.
While credit-card interest isn’t tax-deductible,
you can count on a home equity loan for tax savings. Most
borrowers also find the simplified single payments a timesaver
and good financial management tool—ease the bill-paying
headache with one payment instead of 10—and worry
less that a bill has slipped and become past due.
Multiple credit cards, along with the high-interest attached,
can make it difficult to practice sound personal financial
management. A home equity loan reduces, consolidates,
simplifies and even eliminates debt; it can give you additional
time to pay. But do plan lifestyle changes and action
to ensure your home equity loan is the step needed to
avoid poor financial decisions now, and in your future.
What might this mean to you?
Your credit cards are near maximum limit and the total
debt has climbed to $20,000, a debt that carries an 18%
interest rate. Your minimum payment is $300 but you’ve
vowed to pay $450 monthly, hoping to reduce the high-interest
load. At the current rate of payment, you’ll pay
just over six years, costing you $13,045 in interest.
With a home equity loan borrowed at 8%, your $450 a month
eliminates the same debt in 4 years, 4 months and you’ll
pay interest of $3,732, a $9,000 savings instead of the
hefty credit-card burden. You’ll also realize an
average tax savings of $750-$1,000.
A home equity loan could mean a lot to you! How much?
Contact us.
Invest in education
Invest in your future — or your child’s future.
Use a home equity loan to help with college, skill training
or educational expenses. Here, your loan can serve as
a tax-deductible investment if it results in a higher
salary, employment opportunities and your children’s
earning ability and self-sufficiency. If your family doesn’t
qualify for government-assisted student loan programs,
you may want to consider a home equity loan. Just contact
us to learn more
Yearning to invest or boost your business?
Thanks to the flexibility inherent in a home equity loan,
it may sometimes be used to build a business or extend
investments such as secondary real estate purchases or
to develop a stock market portfolio. You and your F&M
Mortgage Group consultant will want to ensure that your
investment has the best chance of working for you. While
your existing equity is secure, there's no such guarantee
that your investment will be. Contact
us to explore the possibilities
Living large? Buying big?
Your F&M Mortgage Group consultant will advise you
against using a home equity loan to pay for a new car,
new boat, designer wardrobe or the cruise to the Caribbean.
You never want to reduce your home’s value or use
its valuable equity on purchases or lifestyle choices
that depreciate, have no real value or don’t result
in sound financial investments and decisions. In some
cases, however, the reduced interest and tax benefits
of a home equity loan might mean your decision to pay
off a car loan is a smart decision. Or you may have a
medical or financial emergency and need the flexible financial
benefits of a home equity loan.
Contact us to see how a home
equity loan can improve your financial situation. |
| |
|
|
