Financing a Home Renovation with a Fixed Rate Home Equity Loan
Financing a Home Renovation with a Fixed Rate Home Equity Loan
Q: I’m doing some home renovations and I’m not sure how to finance this expense. There are so many options! Which one makes the most sense?
A: As a member of County Federal, you have several options for funding a home renovation. You can open a HELOC, or a Home Equity Line of Credit, which is an open credit line that’s secured by your home’s value for up to 10 years. You can also fund your renovations with an unsecured loan or use your credit cards.
One of the best ways to fund a home renovation, though, is by taking out a fixed-rate home equity loan. Let’s take a closer look at this popular loan option.
What is a home equity loan?
A home equity loan is a loan secured by a home’s value. When homeowners open a HEL, they will receive a fixed amount of cash in one lump sum. Most home equity loans have a fixed interest rate, a fixed term and a fixed monthly payment.
What are the advantages of a home equity loan?
The primary benefit a HEL has over other loans is its fixed interest rate. This means the loan will not be subject to increasing interest rates and borrowers know exactly how much their monthly payment will be for the entire life of the loan. Also, the interest paid on a home equity loan is often 100% tax-deductible (consult your tax adviser for details).
Another benefit of the fixed-rate home equity loan is its repayment plan. Borrowers will be making payments toward the loan’s interest and principal throughout its life. At the end of the loan term, the entire amount will be paid up.
Are there any disadvantages to taking out a home equity loan?
When taking out a home equity loan, borrowers will receive their funds in one shot. This makes a HEL a great option for homeowners who know exactly what kind of work they will do on their homes. However, if they only have a vague idea about the renovations they want to do and how much they’ll cost, they may end up borrowing an insufficient amount.
Finally, borrowers will need to make a monthly payment on their loan throughout its life. Before taking out a HEL, be sure you can afford the payments.
Call, click, or stop by to learn more about County Federals Fixed-Rate Home Equity Loan and to start applying for your loan today.
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