If you find yourself facing a difficult life change, you may be considering approaching a lender for a home equity line of credit (HELOC) or a home equity loan. Before you approach your mortgage company, however, there are some things you should consider. In today’s financial blog post, we are going to look at some good (and bad) reasons to obtain a HELOC or equity line.
In a previous article, we discussed what a home equity line of credit (HELOC) was and the difference between a HELOC and a home equity loan. Today we are going to look at some reason that you should consider such a financial pursuit, as well as reasons that you definitely should not. We will also talk about some of the benefits of a HELOC and some of the negatives too.
Uses for a HELOC
At the end of the day, putting yourself in debt is never a good idea. However, there are some times that a home equity line of credit may actually make sense and be a wise financial decision. Below are some reasons that may justify a home equity line or a home equity loan.
If you are thinking of going back to school or taking some certification courses in an effort to boost your career and earning potential, it may make sense to opt for a home equity line of credit rather than relying on a student loan, as the interest rates and monthly payments may make more financial sense.
Increasing your knowledgebase and earning a degree – or a higher level degree – can raise your earning potential and is always a sound investment. Just make sure you can afford the payments on your mortgage and HELOC while you are in school. Defaulting could mean you lose your home.
Another reason you may consider getting a home equity line is to consolidate high interest debt. This can be a savvy financial decision, so long as your spending habits or the situation that got you into high-interest debt are under control. The last thing you want to do is put your home up for collateral and then pile on credit card debt again.
Life Altering Event
Sometimes a HELOC is taken when disaster strikes, such as when a family member loses their job or is temporarily laid off. This is a risky proposition and should only be taken as a last resort. Your household will already have less income than it had previously, and you will be adding debt (and associated monthly payments) to the pile. That being said, homeowners do choose this option during transitional periods and, when the risks are understood and prepared for, it can help you get your life back on track when disaster strikes.
Should I Get a HELOC?
If you are considering a home equity line of credit – or a home equity loan – and are in need of financial advice, consider contacting North Georgia’s premiere CPA firm, Clayton, Paulk, and Associates.