Your home equity loans need to improve your home, not your materialistic personal needs.
Home values are rising, and homeowners who have equity may be tempted to use this high-valued resource to improve their personal lives. But depending on your personal situation, it may not be the wisest move you can make. Equity should be used as a way to make an investment from which you will get a return. Here are a few home equity loan dos and don’ts to keep you from making a devastating financial decision.
DON’T fund your lifestyle.
There were many factors that led to the great recession one decade ago. Among them were homeowners draining their home equity to fund affluent lifestyles, many of them only to look the part. They paid the price when the housing bubble burst and they lost their homes. Home equity should be seen as an investment, not as extra cash.
DON’T pay basic expenses.
All your routine expenses like groceries, utilities, clothing, and phone and internet bills should already be a part of your household budget. If your budget doesn’t consider these expenses, it’s time to rework your budget or consider a less expensive home.
DO make necessary home improvements.
Your equity can be used to make home improvements because many home improvements increase the value of your home. You’d be able to pay off the loan, plus get the return on investment after you sell the home.
DO consolidate debt.
If you have thousands in credit card debt, you can use your home equity to pay off this debt. When you run the numbers, it makes sense to do it. You may be able to save thousands of dollars in interest.
Use your home equity wisely. Contact Scott Ange at RE/MAX Infinity Westlake Village, California, specializing in the Conejo Valley. My team will fulfill all your real estate needs.