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5 Smart Ways to Use a Home Equity Line of Credit

For homeowners across the globe, home equity lines of credit (HELOCs) have become a handy way of tapping into the value of their homes. However, when borrowing money against your home, it is always a good idea to be a little cautious about what you spend it on. As such, it usually isn't a good idea to use a HELOC to pay for a vacation or buy a new TV. So then, what should homeowners use HELOCs for?


1) Home Improvements
Using a HELOC to make improvements to your home can be a great way to increase the property's value. Whether you want to install a pool, renovate the kitchen, or add a bathroom, tapping into your home's equity is an easy and efficient way to finance the project. In some cases, you might even find that you have more equity in your home after the project has been completed than you did before you used your HELOC.

2) Emergency Fund
Ideally, it is a good idea to have about six months’ worth of expenses tucked away. If you are in a crunch, your home’s equity can serve as a low-interest alternative to credit cards or payday loans. Keep in that that if you do not already have one in place, it may be difficult to qualify for one when an emergency arises.

3) Refinancing Debt
If you have a large amount of high-interest debt, using a HELOC can be a great way of enjoying a lower interest rate. Many forms of debt, such as personal loans and credit card debt are unsecured. As such, they can come with interest rates as high as 20%. However, since your HELOC is secured by your house, you are likely to be able to receive a much lower interest rate. Depending on your circumstances, refinancing high-interest loans into a HELOC can potentially save you thousands of dollars.

4) Long Term Investments
Some homeowners may choose to use their HELOC to invest in the stocks or the real estate market. There are always risks when it comes to any sort of investment so make sure you do your homework. You do not want to overvalue a property or underestimate the costs involved in any investment. If you are looking to invest in something riskier with a higher return, there are many other options.

5) Paying For Education
If you are planning on sending your child off to college soon, or are even thinking about going back yourself, a HELOC might just be a viable way to pay for the tuition costs. Since HELOC interest rates are usually fairly low, they can sometimes compare favorably to traditional college loans. Of course, it is a good idea to closely compare your options before committing to either one.

In Conclusion
Though HELOCs can be an excellent way to access the equity in your home, it is always important to be careful about how you spend your money. By choosing to use your HELOC for one of the uses outlined in this article, you can ensure that your home's equity is being well spent.

For more information contact me today!

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What should you consider when refinancing your mortgage?

Mortgage rates are at a historic low. If you're thinking about refinancing your mortgage, you could possibly save significant amounts of money over the years. Especially in the first years of owning your home, a large percentage of your monthly mortgage payment actually goes toward paying interest rather than the principal.


Refinancing your mortgage is usually done for one of the following reasons:

- To lower your interest rate


This is one of the most common reasons. If you first obtained your mortgage when interest rates were higher, refinancing enable you to save money each month. You may also qualify for a lower interest rate if your credit rating has improved since you first qualified for your home loan.

- To change the length of your mortgage


When you refinance your mortgage, you're really obtaining a new one. You can choose to lengthen or shorten your term - whichever you'd prefer. Generally, shorter mortgage terms have lower interest rates.

- To obtain a different type of mortgage


If you have an ARM (Adjustable Rate Mortgage), your interest rate can fluctuate. You may want to refinance so you can have a fixed-rate mortgage.

What should you consider?

To make sure you'll actually save money by refinancing, it's important to look at the whole picture to know if it's the right decision. Just because interest rates may be lower now than your current interest rate doesn't necessarily mean that you should refinance. Here are some important considerations to keep in mind:

- Fees involved
Your new loan may have a variety of fees with it, including closing costs and an appraisal. Some lenders can fold these fees into the loan so you can pay for them over time rather than upfront. You'll need to weigh any fees you'll have to pay against any savings you might reap.

- How long you've lived in your home
If you've lived in your home for a long time, most of your monthly mortgage payment is probably going toward the principal rather than the interest. If you refinance and get a new loan, you'll be in the opposite situation - most of your monthly payment will be paying interest.

- When you plan to move
If you don't plan to stay in your home for long, you may not have time to recoup enough savings to offset the costs of refinancing.

- Why you want to refinance
Refinancing purely to save money is perhaps the simplest decision. But if you want money to, for example, pay off debt, your decision can be more complicated. It may help your financial situation in the short term, but will it help in the long run?

Refinancing calculators can help you figure out if refinancing is right in your particular situation. Some calculators will estimate the rate you'll need to get to warrant refinancing, while others will help you determine how much you'll save each month. These calculators will provide estimates, not guarantees.

Refinancing your mortgage can often save you money, but it's important to understand your particular circumstances and the details of your new loan thoroughly.

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