As we enter spring, we begin to think about those home improvement projects. The kitchen we stared at all winter stares back at us and starts begging for a remodel. Maybe you’re thinking about how nice it will be to shed the heavy coat and put on the swim trunks for a swim in your very own pool. Or maybe this is the year of financial freedom and you’re thinking about consolidating that nagging debt.
Whatever your goals may be, if you own a home, chances are you have been quietly amassing an untapped resource. That’s where your home equity comes in. Simply put, it’s the difference between the value of your home and what you owe on your home’s mortgage. That difference may have grown larger through extra payments or increased home value. Did you know that it can be used to accomplish all sorts of goals?
Penn Community Bank offers home equity loans because we care about seeing you reach your goals. Let’s partner to help you use your money and resources wisely.
A Resource to Reach Your Goals
A home equity loan is just that: a loan. But it can be used to finance so many different goals:
- Home renovations or repairs
- Debt consolidation
- Start a business
- Pay for college
- Pool
- Vacation property or second home
- Unexpected expenses
With a strong credit history and 15 to 20% equity available in your home, it’s possible for you to finance these goals at a much lower rate than traditional loans or credit cards.
The Benefits of a Home Equity Loan
If you’re making a pros and cons list before applying for a home equity loan with Penn Community bank, here are the pros:
- Lower interest rates: Typically, a home equity loan carries a lower interest rate. This is especially true with a good credit history.
- Automatic deductions equal savings: With Penn Community Bank, we offer a discount on the interest rate if your monthly payment is automatically deducted from your checking or savings
- Lump sum: Spend the loan as you see fit.
- Avoid annual fees: Home equity loans do not carry annual fees.
- Predictable monthly payments: Variable payment amounts can be really hard to budget for. But repaying a home equity loan with a fixed interest rate removes all the guesswork.
- Tax deductible: Certain repairs or home improvements may be tax deductible. Check with a tax professional before making decisions based on how your taxes might be affected.
How a Loan is Different than a HELOC
A home equity line of credit boils down to this: you have a percentage of your total equity available to you as a line of credit that you can draw from any time. It’s not like getting a loan, more like getting a credit card using equity in your home as collateral.
The real differences are:
- No lump sum: You draw from your HELOC as you need it.
- Payments are interest-only to start: Interest only minimum payments during the draw period followed by principal and variable interest payments for the next 20 years following the draw period.
- Interest rates are variable: Like credit cards, the HELOC rates are variable. That’s a big consideration because, unlike the fixed rate of a home equity loan, you might pay more on interest over time depending on the prime rate issued by the Federal Reserve.
Use Your Resources Wisely
If you have 15 to 20% equity available and you’re eyeing a major project, expense, or debt resolution, consider taking out a home equity loan. The value of your home can help you reach the goals you’ve had for a while. You might not have even considered that you’re literally sitting on available funds.
All that, plus low interest rates make the home equity loan a solution that could also be a long-term advantage over higher or variable interest rate loans and credit cards. A home equity loan can be a superior solution when you’re comparing your options for financing the next big project.
Contact us today if you’re interested in learning whether a home equity loan is right for you! If you’d rather talk face-to-fact, visit one of Penn Community Bank Financial Centers near you.
