Home equity is the difference between your homes appraised value and the balance of all of your mortgage loans. You build your home equity by increasing your home's value and by paying down the balance on your mortgage.
You can put the value of your home to work with a home equity loan. Home equity loans typically offer lower interest rates than many other loan programs. The interest you pay on a home equity loan may be 100% tax deductible, just like your mortgage. (Consult a tax advisor concerning interest deductibility).
Determine your needs
Before beginning the home equity process, you should determine your exact need for home equity financing. Homeowners use home equity financing for a variety of different reasons, some of which may include:
- Paying off debt, such as credit cards
- Making home improvements to increase a home's resale value
- To help pay unexpected medical bills or deal with other emergencies
- Purchase a new automobile
Once you determine your need for home equity financing, you are ready to begin thinking about the home equity loan process.