May 18, 2022
Home Equity Loans Are in Bloom. But is One the Right Pick for You?
Spring has sprung! You remember it – that glorious time of year to frolic in your yard, crank open those windows, and start pressing those white pants for the start of summer. YES!
It’s also a very busy season for home equity borrowing.
With housing prices so high, there’s plenty of equity out there for homeowners this season. Plus, with the benefits that come with home equity borrowing like flexibility, no closing costs, and potential tax savings (consult your tax advisor), it can be a viable solution for managing life’s planned and unplanned expenses.
But, with interest rates high and more rate hikes expected, is now still a good time to take out a home equity line or loan?
Our resident real estate lending guru, Don Frost, Executive Vice President of Consumer Banking, thinks so: “Home equity rates are still pretty low. So, in the right situations, it can be a good way for people to borrow.”
One such situation involves home improvements.
“Home equity is ideal for projects that increase the value of your home, such as adding square footage or a garage,” Don shares.
But value doesn’t always have to be about market value.
“Since the pandemic, people are spending more time at home and using home equity to make improvements that don’t necessarily add to the value of the home but are important to them – whether it’s putting in a swimming pool or fixing up their yard.”
The flexibility to borrow for almost any purpose
Though it can be ideal for home improvement projects, home equity credit can be used for a variety of purposes that have nothing to do with the home (other than using its equity to borrow). One common use is college tuition. With the average private school tuition hovering near $40,000 a year, and more than $10,000 for in-state schools, families are finding that home equity can be a more affordable way to pay for school.
Another common use of home equity credit is debt consolidation. While consolidating debt to a home equity loan may help people reduce interest costs, Don doesn’t believe it’s always a good idea.
“You really have to understand why you have the debt in the first place. If it’s because you have a spending problem, taking out a home equity line or loan isn’t going to fix the problem. You could end up with an even bigger debt problem.”
And though home equity gives you the flexibility to borrow for almost any purpose, Don cautions borrowers about using it for frivolous purchases like taking trips. “You’re putting your home on the line, so you want to be smart about how you use it.”
Avidia is here to help with honest advice
So how do you know if getting a home equity line or loan is right for you? Don and his team can help you review your goals or expenses to see what makes sense for you.
To speak with an honest team member, call (508) 508-2265. Or stop by any branch. Wear your white pants if you want (even if it’s before Memorial Day). You only live once!