Own Your Home? 3 Things You Should Consider Before You Apply For A Home Equity Loan

Posted on: 20 October 2017

If you've been paying off your home for quite a few years, and you've got a lot of equity built up, it can be tempting to turn the equity into usable cash. Home equity loans allow you to get real use out of the money you have invested into your home. However, home equity loans aren't always the solution people expect them to be. That's why it's important that you ask yourself some serious questions before you apply for a home equity loan. Here are three questions you should answer before you take out a loan on the equity in your home.

Will It Really Take Care of the Debt Problem?

If unexpected struggles have left you dealing with debt that you can't get out from under, a home equity loan can help you get those debts paid off quickly. However, you need to make sure that the loan will solve your debt problems, instead of prolonging the inevitable. If your debt is due to circumstances beyond your control, such as a sudden loss of employment, or medical emergency, a home equity loan can help you get over those economic hurdles. If, however, your debt is due to overspending, or poor budgeting, you may want to look at other avenues to get yourself out of debt, especially if you haven't gotten your overspending under control. You could end up in the same place later on, but with an additional bill to pay each month.

Can You Pay It Off Before Retirement?

If your home is almost paid off, and you're getting closer to retirement age, you'll want to make sure that you can pay your home equity loan off before you retire. If you can't, you might be better off waiting a few years and then taking out a reverse mortgage on your home. However, if you can pay your home equity loan off before retirement, it will provide you with the funds to take care of home improvement changes that you want to make before you actually retire. This is particularly beneficial if you plan on staying in your home long after you retire.

Will It Add Real Value to Your Home?

If you're planning on selling your home in the future, and you want to use the equity in your home to make some improvements, be sure the improvements will add real value to your home. The last thing you want to do is take out a large loan that will only increase the value of your home a few thousand dollars.

If you have questions about a home equity loan, talk to a lender near you. They'll be able to help you find an equity loan that will work best for you.