Home Equity Loan - Case Studies
Using a home equity loan
for home improvements.
and Russell are considering borrowing from their home equity to
make home improvements. They plan on doing most of the work themselves
and they have several jobs in mind including remodeling the kitchen,
knocking down walls and adding a back room. They have a rough estimate
of costs and they plan on doing the work over the next year. What
type of home equity loan is right for them?
Analysis: Charlene and Russell's situation points to a home
equity line of credit being the best option for them. Since they
are doing the work over the next year, they will need to spend money
on supplies and tools at intervals. A home equity line of credit
is ideal for this situation since it allows you to access money
at intervals - you benefit by using the money only when it is needed
and therefore avoid paying interest until that time.
A home equity line of credit works a lot like other lines of credit
- you have a limit or a maximum amount that you can borrow against
as you need it. The line of credit also works well for Charlene
and Russell since they do not know exactly how much they will need.
When they have an estimate of how much they will need, they should
probably 'pad' or add a little extra money to the loan amount for
safety. When they have received their line of credit, if they decide
not to do certain parts of their renovations or if they over-estimated,
they do not have to borrow that amount from their credit line.
More Related Information On...
home equity lines of credit - see Home
Equity Lines of Credit, Types
of home equity loans
choosing a type of home equity loan - see Which
home equity loan type is right for me?, Types
of home equity loans
- Using home
equity for debt consolidation: Tony wants to use the
equity he has in his home for debt consolidation but he is unclear
about the advantages and disadvantages of doing this. If borrowing
from his equity is suitable for his situation, what type of loan
should he get?
you use the equity in your home to buy a car? Christine
wants a new car but she has no savings. Should she use a home
equity loan to buy a new car?
refinancing? John wants to borrow from the equity
he has in his home but he is not sure if he should get a home
equity loan or cash-out refinance?
of accepting a loan offer. Milton is thinking of accepting
a home equity loan loan offer. How will this affect future selling,
future home equity borrowing and what will be the tax implications?