05/ Do you have equity in your home? If so, the equity could help you qualify for a home equity line of credit (HELOC). Similar in some ways to a credit card, a HELOC gives you access to as much money as you need - up to a predetermined limit - when you need it.
One key difference is the interest rate which is usually lower than the rate charged on credit cards. The lowest interest rates translates into lower payments. However, the rate on a HELOC typically is adjustable meaning that when the interest rate increases, so do your payments.
Something else that's important to know about a HELOC is that it's considered a secure loan. The collateral used to secure it is your home. Securing a loan with your home may enable you to deduct the interest at tax time. However, it also means your home could be at risk if you default on the loan.
If a// variable interest rate isn't right for you, consider investigating any of the other mortgage refinance or second loan options that offer a fixed rate. There aren't any restrictions on how you can use your HELOC. But since your home is used as collateral, it's a good idea to use it wisely. Savvy homeowners use the money to make home improvements and repairs that increase the home's value. But it can also be used for other purposes including:
o Paying off debt o Purchasing a second or vacation home o Putting yourself or a child through school o Taking a vacation o Buying a car o Reducing medical expenses o Building an investment portfolio o Covering other major expenses o Saving it for use during an emergency.
A HELOC is better suited for covering major expenses, not day-to-day expenses. But again, if your HELOC has a lower interest rate, it may make sense to use it to purchase items that you would otherwise purchase with a higher-interest credit card. Just be sure you have the financial means to repay any expenses paid for using your HELOC. If you can't afford the payments, you'll put your home at risk.
If you're unsure the best way to pay for a purchase, take time beforehand to figure it out. If you find your options limited, consider putting off the purchase until you're in a better financial position.
