Using Your Home Equity to Meet Short Term NeedsBy Karen Lawson
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You bought your home some time ago, and have enjoyed huge increases in home equity over the last few years. Thanks to surging real estate markets, you're set for retirement. Or are you? Changing real estate trends can make short term use of your home equity a sensible alternative.
Today's Real Estate Trends Can Impact Tomorrow's RetirementA recent report by Time magazine cautions against relying upon home equity to fund your retirement. Although many homeowners have enjoyed extraordinary appreciation in real estate values, these values are cooling off nationwide. In August, average home prices declined in approximately one quarter of US cities. It may not be time to press the panic button, but you can use some of your home equity to address short term financial needs such as paying off high interest consumer debt, or making home improvements that can increase your present quality of life while contributing to the value of your home. Refinancing can help you stabilize your mortgage payments to a fixed rate and eliminate high interest debt. Since consumer debt is not tax deductible, it's often possible to gain tax benefits by paying off your credit cards, car loans and other consumer accounts through refinancing or a home equity loan.
Conservative Use of Home Equity Cleans Up Financial WoesAlthough home equity is a valuable resource, it's possible to enter treacherous waters by excessive borrowing against your home equity. As real estate markets continue to adjust, you may want to reconsider taking out a home equity loan for a dream vacation or to install a swimming pool. Before financing your home improvement projects with a large home equity loan, it's a good idea to research market trends in your area, and to determine which home improvement projects will add value to your property, especially if you're planning to sell your home within a few years. Your financial advisor, local real estate professionals, and mortgage lenders can help you decide what type of home equity loan or refinancing will work for you now while protecting assets for your future.
About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds an MA degree in English from the University of Nevada, Reno.
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