Sometimes you can save a little money up front with a variable-rate home equity line of credit, but a fixed-rate loan will be more predictable and you can always budget your loan payment each month because the minimum payment will be set in stone . There are several different reasons why people will take out a fixed-rate home equity line of credit, so if you’re thinking of doing any of these things, this is one option you might want to consider.
A traditional reason people apply for a home line of credit is to make home improvements.
If you moved into your home several years ago and are ready to start laying new flooring, replacing kitchen appliances, or doing more major repairs and renovations like adding or tearing down walls, a fixed-rate home equity line of credit could be an option. good way. to carry out. One way to be sure that this line of credit is worthwhile is to make sure that the improvements you are making are actually increasing the value of your home.
This way, you’re taking out a line of credit against the current value of your home, but you’re making your home worth more, which actually increases the equity you have in it. However, she didn’t improve her house for more than it would sell for in her neighborhood; Even if you plan to stay in your house for a while, you’ll still want it to be salable just in case, and you can’t sell a house that’s worth much more than those in the surrounding neighborhood.
To make sure you’re not putting more money into your home than you’re going to get out of it, check the median home prices in your neighborhood and don’t add too many features that your neighbors’ homes don’t have. I do not have
Another reason to get a home equity line of credit is to make a major purchase. Maybe you want to take the vacation of a lifetime, or maybe you want to put a pool in your backyard. Either way, make sure you’re making a wise financial decision and that you’ll be able to repay the loan easily.
Also, see what you’ll end up paying once the interest rate is added. You don’t want to end up paying $15,000 for your $10,000 vacation when you could have saved some of it in the first place!
One last reason some people use a fixed-rate home equity line of credit is to consolidate existing debt.
While a line of credit isn’t exactly the same as a home equity loan, it can be used in much the same way. You’ll use the credit you get from your home equity to pay off higher-interest debt, like credit cards and cars. You’ll then be left paying off your home line of credit, which will likely lower your monthly payments and certainly lower your interest rates.
This can be a useful financial move if you have a lot of credit card debt.