Maybe you’ve recently noticed that your kitchen isn’t quite as functional as you thought, the summer heatwave has you considering a pool, or you’re just looking to do some preventative maintenance on your house. Before reaching for your high-rate credit card to fund your home improvements, consider tapping into your home equity! For many people, your home is a large piece of your net worth and, with home equity, it is your best financial asset to make these enhancements.
HOME EQUITY LINE OF CREDIT
There are two major ways to utilize your home equity. The first is a home equity line of credit, or HELOC, which is a revolving credit line that allows you to borrow money as needed to a limit during a specified time period, with your home serving as collateral for the loan. At Wasatch Peaks Credit Union, we approve applicants for a specific amount of credit by taking a percentage of the home’s appraised value and subtracting the balance owed on the mortgage.
The second type is known as a second mortgage, which is also secured by your home’s equity and allows you to borrow a fixed amount that you receive as a one lump sum. The amount you can borrow is like a HELOC as we can utilize a percentage of your home’s value, minus the balance of your mortgage. Most second mortgages have a fixed interest rate, a fixed term, and a fixed monthly payment.
Your home equity can help you with more than just home improvement! They can be used to fund your vacation home, weddings, vacations, tuition, or even to start your own business.
When deciding on which type of loan, consider the pros and cons to find a good fit. A HELOC will allow you more borrowing freedom than fixed home equity loans, with an extended draw period during which you can withdraw money as needed with spending flexibility. This helps when you are unsure of your projected budget and anticipate potential future needs. You will have to consider interest rate fluctuation during the loan and prepare to budget for variable payments.
With a second mortgage, you have set terms and payments that won’t vary month to month and a consistent rate throughout the loan. We recommend checking with your tax advisor because interest paid on this type of loan may be tax deductible. As you only receive one lump sum, you should consider your spending budget and responsibility.
So, let’s talk. You supply the ideas, Wasatch Peaks can supply the loans to make your dreams a reality. Call our Pleasant View Branch at 801-476-6304 and speak with a representative or apply online at wasatchpeaks.com and start enjoying the equity in your home today.