Did you know that utilizing the equity in your home can prove to be one of the most convenient sources of funding? The approval of a home equity loan opens up a myriad of doors for homeowners, such as funding to help renovate property, support new business ventures, and help you manage debt.

How Exactly Does A Home Equity Loan Work?

Home equity loans allow you to take advantage of the value (the “home equity”) that your home and property have built up. The home equity loan allows you to borrow the money that you need by using that value as collateral.

Typical examples of how homeowners maximize their home equity loan include:

  • Home renovations and upgrades
  • Starting or growing a business
  • Debt consolidation
  • Using the funding as support during unexpected financial situations

While the name “home equity” may sound complicated and intimidating, it actually only takes some basic math to calculate, and at its core, home equity is just the difference between the valuation of your home and the outstanding amount owed on your mortgage.

Here’s a simple example of how you would calculate your home equity:

Say, for example, your home is valued at $500,000, and you currently owe $200,000 on your mortgage. Your home equity is the difference between those two, which is $300,000.

$500,000 – $200,000 = $300,000.
Appraised value – mortgage = home equity

Optimizing Your Home Equity

Home equity loans are often appealing and advantageous for a variety of reasons. For instance, they allow you to access larger amounts of fundings with typically lower interest rates than unsecured loans (no collateral) offer.

However, home equity loans are not offered at all financial institutions, which is why private lenders are perfect for when you’re trying to optimize the use of your property’s home equity. With the variety of benefits, here’s a more thorough breakdown of how homeowner’s typically maximize their home equity loans.

Debt Consolidation

To consolidate your debt means to use a single loan to help pay off a number of smaller bills, debts, or loans. Among being able to merge your debts, here are some additional opportunities that home equity loans provide:

  • Simplification of tracking your bills
  • Access to paying off debt faster
  • Lower overall interest rates
  • Reduce monthly payments

Debt consolidation loans that are born from home equity allow you to turn financial burdens, such as credit card debt, into a single simple payment that is paid off monthly.

Home Renovations

Home equity loans provide you with the equity you’ve been needing for home renovations, as well as for any other prospective investments in property. However, we wish for you to be mindful of the following:

  • It may take many years to pay down funds yielded by refinancing mortgages.
  • Using credit cards to fund your supplies often come with short payment terms and high interest rates.
  • Seeking out a personal line of credit or finance loan, as an alternative to home equity loans, is difficult to acquire due to strict lending requirements set out by banks.

This often makes equity-based renovation loans the optimal choice when in need of funding for such home improvements. With their lower interest rates, better repayment periods, and more easier approval processes, you can begin to see just how beneficial home equity loans can be.

Investing In Your Business

The value in your home further provides you with opportunities to invest in whatever your business ventures and endeavours may be, without having to worry about the stresses and difficulties attached to typical small business loans.

Private lenders prioritize the value you hold in home equity, unlike traditional financial institutions. If you own your home, your chances of tapping into your equity are strong when looking to access the capital you need.

Access Your Home Equity, Today

We’ve just discussed some of the various ways that homeowners have been optimizing their home equity to further their financial aspirations. However, the potential that home equity loans hold in making your lifestyle and financial decisions easier are unbounded to the examples that we have shown you, and there many other ways a home equity loan can help ease your financial needs.

Take your first steps towards your financial dreams today, and fill out our cost-free zero-obligation form to find out how much you qualify for!