Perhaps the biggest and most important investment anyone hopes to make in their lifetime is that of buying their own home. Many look forward to the time when they have put away enough money in the bank and have mustered enough credentials to apply for a home loan. What few people realize is that 15 years down the line they have build up a sizable amount of equity that can be made available for starting a business, medical emergencies, and paying down high interest debt.
When you initially look to get a mortgage a private lender will look into a number of variables such as your income, financial history, and credit rating before signing you up for a home loan. A simple mortgage calculator can help you assess whether your have enough to cover the initial down payment and succeeding mortgage payments.
As you slowly make your way towards paying off your home loan, you build up your equity and this in turn gives you the ability to set up a line of credit for emergencies, starting a business, and personal investments. A Home Equity Line of Credit or heloc is a loan that a lender agrees to let you pull out the equity you’ve built. As opposed to traditional loans, a heloc loan is limited to the amount of money available in your home equity line of credit which you can compute using a heloc calculator. Simply put, it works like a credit card wherein you spend within a specified amount which you will need to pay back with interest. If you don’t use the funds, then there is no charge.
This type of loan is especially useful in times of temporary financial trouble. Rather than getting a bank loan or using a credit card, you can minimize on interest rates through a heloc loan. In fact, most financial experts agree that home equity lines of credits can save you money, or allow you put that money towards other investments that can produce a higher return.
Here are a few opportunities you can look into to maximize your heloc loan.
Starting a Business
Rather than let your equity just sit there, you can put it to work starting a side business from home. This can give you the capital you need to make your initial purchases and create a new income stream.
The good thing about a credit line is that it can act as a cash cushion that you can use for unforeseen medical emergencies which oftentimes require a sizable amount of money. A heloc allows you to immediately acquire the money you will need without going through a stringent loan process and putting your credit score at risk.
A heloc loan is a good way to pay off your high interest rate debts like credit cards, and save yourself from the mounding interest and penalty fees that can eat up your savings.
Given today’s skyrocketing costs of college education, your home equity credit line can be used to cover for the expenses involved in putting your child through college.
Your heloc loan is also a great way to get the resources you will need to either renovate or extend your house, thereby increasing its value.