The holidays are a great time to unwind and spend quality time with the friends and family. For some, the Holidays can also bring financial hardship. From home renovations to gift giving to hosting a special night, to holiday vacations, the stress of spending and the price of enjoying yourself add up…quickly. It’s important to stay on top of your expenses and ensure that you are financially stable after the excitement of the holidays settles down.
Cash flow is important during the holidays, as unlike holiday spending, your other bills and expenses are here year round. Home equity loans are a great solution to increase cash flow and ensure that your financial obligations are met. It is very common for people to overspend during the holidays using high interest credit cards, borrowed funds or directly from a savings account. A home equity loan is a low interest solution that will allow you the funds to have a comfortable holiday. Quite honestly, home equity loans a great idea any time of the year, but people tend to need money more than ever during the holidays seasons. You may not need to pull out all of the home equity you have secured, but you may want to pull out $5,000, $10,000 maybe $15,000. Perhaps you want to renovate your kitchen and dining area and you need an extra $20,000. As long as you have the available home equity, the flexibility is yours, and what better time than when the rates are historically low?
Here are the basics of a Home Equity Loan:
- A home equity loan is a loan where money is lent against the equity (of equal amount) in your home (collateral loan)
- The two forms of home equity loans are; Fixed term loan and a HELOC (Home Equity Line of Credit)
- Both forms of home equity loans hold the title of ‘Second Mortgage’
- Interest rates on a home equity loan are typically higher than a first mortgage but significantly lower than credit cards or unsecured loans
- The calculation of how much home equity you have is:
- Current value of your home – the amount owing on your first mortgage = home equity
- There is a cap on how much equity you can pull out (loan-to-value is dependent on institution)
- Fees that may apply to obtaining home equity loan are; lawyer fee, appraisal fee, brokerage, commitment fee