If you’ve been thinking about doing a remodeling project at your house, but you don’t have the money saved to get started, you might have begun considering a home equity loan. These loans are quite popular, and many homeowners use them to renovate their residences. However, it’s important for you to fully understand how home equity loans work before you apply for one.
As you look through the next several paragraphs, you will see key positive and negative points that pertain to these loans. Only you and your family can determine where you stand on home equity loans, so make sure you discuss this guide with your spouse or anyone else who will be assisting you in your final decision. It is also important for you to work with a reputable lending agent who can guide you toward a loan that is appropriate for your needs and financial situation.
Pros of Home Equity Loans
You are likely to get approved – Because you have to use your house to secure a home equity loan, the odds of getting approved are fairly high. This is great news for people whose credit is less-than-pristine. It does bear noting that you will have to provide a great deal of documentation before obtaining this sort of loan, though, especially if your credit score is poor.
You can get a lot of money – If your home has enough equity built-up, it is possible to borrow large sums of money with these types of loans. This is wonderful for people who are planning to do extensive renovations that are going to cost multi-thousands of dollars. In most, but not all, cases, the less time a homeowner has possessed his or her home, the less funding he or she will be eligible for.
Tax perks – Depending on what kinds of renovations you’re doing, you may be able to get tax breaks for making “substantial improvements” to your residence. You may also qualify for state tax credits in Virginia, North Carolina, or South Carolina. Speak to a qualified CPA or tax expert to learn more about this topic.
Cons of Home Equity Loans
Lenders are protected more than homeowners – Because you have to essentially offer your home as collateral to take out a home equity loan, the lender holds the upper hand in the situation. If you are unable to make payments for whatever reason, for example, your house could be repossessed.
You can take out too much – Since people are often approved for large home equity loans, they sometimes accept all the money without thinking it through. You have to pay back every cent of funding you receive from your lender. This could put you in a financial bind if you took out more than you really needed to do your initial project and spent it on other improvements that weren’t part of your original plan.
There’s a lot to think about when you’re preparing for a renovation! The team at Hatch Homes can help ease your stress even before you’ve secured a loan. We will work with you to devise a plan for your remodeling project, including a budget and a reasonable timeline. We love meeting new families in the Carolinas, and we look forward to helping you improve your home.