It’s finally getting warm, and with that comes major summer projects! This year besides tackling all of the small things, we are focusing on our deck. We want to replace it with a resin deck, since we do live in Wisconsin and it will last a lot longer. The deck is original to the home and it’s ready to see the end of its days. Actually, it’s a really nice three-tier deck with railings and built-in flower planters; which in turn is just going to make it even more of a monster to replace. However, I think that once it’s done it will be well worth it and will add some value to the house.
Now the only question is: how are we going to pay for this massive overhaul? Well we have a couple of options: cash, credit cards, personal loan, home equity loan or a home equity line of credit (HELOC). It didn’t take long for us to figure this one out…home equity lending can be a valuable tool for responsible borrowers. Did you know that by using the equity in your home, you could qualify for a substantial amount of credit, available for use when and how you please?...at an interest rate that is reasonably low compared to the other options? What’s more, you can deduct the interest on your taxes because the debt is secured by your home (consult your tax advisor). So if you’re in the market for some much needed cash for summer projects, a home equity plan may be just right for you!
Let’s compare your home equity lending options.
- Home equity loans are installment loans, like regular mortgages and auto loans, and they usually come with fixed-rates and fixed-payments. You’re given a certain amount of money, typically received all at once, and pay it back according to a set payment schedule, over time.
- Home equity lines of credit (HELOC’s) are variable-rate loans and work more like credit cards. You’re approved a specific credit limit that you can borrow against whenever you need it; and when you pay down your debt, it frees up more credit that you can potentially use.
How do you decide which one is right for you? A home equity loan is generally the best choice when you know exactly how much your purchase is likely to cost, such as a single, large purchase or any major home improvement project where you have been given a quote of the total cost…like a new roof on your home or paying off a credit card. A HELOC provides a convenient way to cover short-term, recurring costs, such as the quarterly tuition for education or ongoing medical bills, where you are unsure of the total cost.
It’s important to know that with either type of borrowing, you’re pledging your home as collateral. Because your home is likely to be your largest asset, many homeowners use their home equity loans only for major items such as education, home improvements, property investments or medical bills and not for day-to-day expenses. If you fall too far behind on your payments, the lender can foreclose and take your house.
So what will we choose for our deck overhaul? Well since we will be getting an estimate for the total cost and will know just what we are in for, we’ll be choosing the standard home equity loan!
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