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HII's Suggested Home Services Merchants
- Century 21 Home Improvements
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"Home Free"
by Jessica Groach
jessica.groach@homeimprovementideas.net
Home Improvement Ideas Columnist
Think you don’t have the money for home improvements? The money may be closer than you think.
With today’s low interest rates and a growing economy, property values are growing and house payments are staying low. It’s a good time to consider taking advantage of a home equity loan.
What is it?
As loan officer Rafael Arango explains, "Say you bought your house for $100,000, and now it's worth $200,000. You have $100,000 in equity. With a home equity loan, you can draw on that money."
You have two options: a home equity line of credit (HELOC), where equity is drawn upon slowly like a credit card or a checkbook, or a lump sum withdrawal.
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Which option should I choose?
"A HELOC is a great option for home improvement projects," explains Arango. "A lot of people don't know how much a project is going to cost, or they do the project in phases, so they'd rather draw on that money as they need it. Meanwhile, the home improvement increases their home's value." Unlike credit cards, which usually have interest rates between 12-20%, the HELOC is tied to the Prime Rate, which today is around 6-7%.
Some homeowners prefer taking a lump sum, or "cashing out,” especially those with a lot of debt. Rather than paying a car loan at 10% interest, and a credit card at 17% interest, a home equity loan at 7.5% interest could pay off those debts and involve smaller payments.
"Plus, any interest you pay on a home equity loan is completely tax-deductible," says Arango.
There are disadvantages to drawing on your home equity; for instance, your property values go down and you're upside down in your payments. "It's unlikely to happen these days, but it's not impossible," Arango points out.
With so many options available, maybe you can find money in your house.
About the Author
Jessica Groach, a new homeowner herself, is a freelance writer and writing instructor at the University of Nevada, Reno. Her work has appeared in various lifestyle and business publications, including a Warner Business Book, and she has seven years’ experience in advertising and television production.
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