June 21, 2022
Here are the eight most common reasons why people use home equity loans.
Home Equity Loans
To better understand what it means to take out a home equity loan and how the process typically works in Canada, check out our blog Borrowing Against Home Equity. In this short article, we will run through eight of the most common reasons why a person or business will use a home equity loan.
Tapping into your home equity is one of the many benefits of being a homeowner. It can be a convenient, low-cost way to borrow higher amounts of money, and can often be used for many different reasons. If you’re thinking of taking out a home equity loan, this list should give you a better idea of what it could be used for.1. Home Renovations and Repairs
Whether it is planned or not, every homeowner knows how expensive a renovation or repair can be –in fact, some experts anticipate renovation costs to double within the next 12 months, because of the increase in the price of materials. When it comes to spending $50,000+ on your landscaping, roof, kitchen, bathroom, or really whatever it is; many people will often take out a home equity loan to finance the project. After all, it may be more affordable to pay monthly installments, than to dish out a lump sum amount in one shot. In addition to that, it can also increase the value of your home. Someone with an old kitchen may want to invest in a new one because they know that it will make their home more valuable. The same can be done for landscaping, bathrooms, flooring, or really almost anything.
Ultimately, using a home equity loan to renovate your home is often one of the best ways that you use it. Not only can it make a large job much for affordable, but it can also bring more value to your home and increase your home equity if done right.
2. Bills and Expenses
A second major reason why people use home equity loans is to pay off bills and expenses. We’ve all been in a position where we needed to pay for something unexpectedly; and sometimes, the amounts can get very high. One common solution that people often use to relieve these large expenses, is to take out a home equity loan. Instead of having to pay a large amount of money upfront, they can break it down into affordable monthly or semi-monthly payments. Imagine someone needs to do a major repair on their car, and they get quoted $20,000 in total. Rather than taking $20,000 out of their bank account, with a home equity loan, they can pay it in monthly installments of, for example, $400, making it much more affordable.
3.Business Expenses
Operating a business can get very expensive. From paying your staff, to buying inventory, to the monthly rent payments, it all accumulates very quickly. That’s why business owners who are also homeowners usually tap into their home equity to finance part of their business. It gives entrepreneurs access to a quick and large cash inflow so that they can operate their business more efficiently and pay off the loan at their own pace with the cash flows received from operating. So, whether it be to purchase new equipment, buy a truck, pay for overhead, or do so much more, it is worth considering taking out a home equity loan to make your business run better.
4.Vehicle Financing
There is nothing more exciting than buying a car, but, of course, and as we all know, it is very expensive. Buying any new vehicle in Canada will set you back tens of thousands of dollars, and financing with the dealership has gotten a lot more difficult in recent years. You may be there for hours, reading through long, small-font, boring documents, only to be rejected at the end of the process. That’s yet another reason why you may want to consider tapping into your home equity. It is often much simpler to qualify for a loan from a company like Floria so that you can get your money fast and buy the car upfront.
5.Large Purchases
Anniversaries, birthdays, holidays, or even just treating yourself – no matter what the occasion is, it often means money coming out of your pocket; and sometimes that amount can get quite high. By taking out a home equity loan, you’re able to get your money fast and purchase whatever the item may be. Whether it is for a piece of jewelry, clothing, accessories, or so much more, it may make more sense to finance the purchase and pay it over fixed installments so that you can manage your budget easily.
6. Wedding
Weddings are often regarded as one of the first major expenses that one may come across. Everything about this experience is expensive – the bride’s dress or groom’s suit, renting a hall or restaurant, paying for the meals of hundreds of people, and ending it all off with a honeymoon; at some point, it all accumulates into one huge expense. But there is no need to spend it all out of your own pocket – by taking out a home equity loan, you can borrow the money and repay it on your own terms so that you can enjoy the amazing moment with your loved ones, without having to stress over how much it will cost.
7. Travel
Perhaps one of the more relaxing reasons to take out a home equity loan... you’re going on vacation! As more and more people begin to travel, prices of flights, hotels, and restaurants have all increased. If you’re thinking of taking your family away on vacation, you should consider financing it. Tapping into your home equity allows you to get your money fast and provides you with affordable repayment options that fit your budget.
8. Educational Expenses
Last but certainly not least... educational expenses! The value of education is priceless and yet it is often unaffordable to so many people. Tuition and textbooks alone can cost a fortune, and that doesn’t even consider the price of other common expenses like school supplies, transportation, student housing, and so on. Nonetheless, once all is said and done, it becomes a financial burden and that’s why many people resort to home equity loans. They allow you to borrow larger amounts of money at affordable payments so that you won’t need to stress over the financial strain that educational expenses can cause.
Summary
Ultimately, the main takeaway from this is to show that a home equity loan can be used to your advantage. You’re able to access much higher loan amounts, get your money much faster, and turn a large payment into affordable monthly or semi-monthly installments. If you are a homeowner, it is always worth considering tapping into your home equity before making a large purchase.