What would you do to your home if you had more funds? Upgrade your kitchen or bathroom? Transform your basement into a home office? It’s fun to think about the possibilities…and you may not have to wait until you build up your savings—or win the lottery—to get started. Tapping into your home equity with a home equity loan can free up funds to tackle those projects on your wishlist.
What exactly is a home equity loan? A home equity loan enables you to borrow against the equity in your home, which is the difference between your home’s current value and your mortgage’s outstanding balance.
How does it work? A home equity loan is repaid independently alongside your existing mortgage, which is why it’s sometimes called a “second mortgage.” It doesn’t impact your primary mortgage rate, and unlike a home equity line of credit (HELOC), home equity loans usually have a fixed interest rate. You’ll receive the money as a one-time lump sum.
Ready to convert your home equity to cash? Check out these six creative uses for a home equity loan.
While flowers and regular lawn maintenance can brighten up your exterior, other changes to your curb appeal require more of an investment. Consider how you could use a home equity loan to create that first impression and grand entrance you’ve always wanted.
- Replace fencing
- Install outdoor lighting
- Get a new garage door
- Build a porch or portico
- Professionally landscape your yard
- Pave your driveway or walkways
- Paint or install new siding or manufactured stone veneer
- Update front door
Smart devices can optimize energy usage, allow for automation and remote control of various home functions, and create a convenient living environment. Think of how you could potentially leverage this innovative technology throughout your home by installing and setting up:
- A smart security system, speakers, thermostat and doorbell
- Smart lighting
- Smart appliances
- A smart heating and cooling system
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Extensive kitchen and bathroom renovations can come with a hefty price tag. Even minor updates can quickly add up. But as the most frequently used rooms in the home, you need your kitchen and bathrooms to be as functional and aesthetically pleasing as possible. A home equity loan can help you fund the following:
- A complete kitchen or bathroom renovation, including structural and layout modifications, new cabinets, tubs, tiles and fixtures, and changing electricity and plumbing
- New flooring
- Upgraded appliances and lighting fixtures
- Upscale countertops and backsplash
Are you one of the many who are now working from home? Recent statistics found that 12.7% of full-time employees work from home and 28.2% work a hybrid model. If every day is “take your laptop to the kitchen table day,” maybe it’s time to create a dedicated workspace. A home equity loan could help you:
- Transform your basement, garage or extra room into an office
- Build a home extension to serve as your workspace
- Purchase ergonomic furniture and upgraded equipment
- Customize your current home office to optimize space and increase functionality
Energy-efficient upgrades can really pay off in terms of potential money saved over time.
- Add insulation
- Replace old appliances and air cooling and heating systems with ENERGY STAR-certified models
- Install solar panels
- Upgrade outdated windows and doors
Serenity can be as close as your backyard. Maximize your outdoor space by creating your private, personal oasis for relaxation, recreation and entertainment.
- Add a deck, patio or gazebo
- Build an outdoor kitchen
- Install a swimming pool or water feature
- Add a fire pit or outdoor fireplace
- Upgrade or add outdoor lighting
- Add a basketball or tennis court or outdoor putting green
A home equity loan for home improvements may increase your property’s value and equity. For instance, if you expand your home’s square footage, you’ll boost its market value and potentially increase your profit upon resale. Plus, you may be eligible to deduct the home equity loan interest from your taxes, leading to additional savings.*
There’s no place like home. But if you’ve been putting aside certain projects due to financial constraints, consider a home equity loan. It may be just what you need to free up funds and put your exciting plans into action.
*Consult a tax adviser for further information regarding the deductibility of mortgage interest and charges.