Should You Use a Home Equity Loan for House Repairs and Improvements?
If you are in need of funds for performing house repairs and general improvements, consider the home equity loan option. This type of credit, often called a HELOC, will allow you to borrow money with the equity in your property as the collateral. The amount of money you can obtain using this process is dependent on the value of your property as determined by an appraiser. In general, equity loans are beneficial because of their relatively low interest rates. However, you must be cautious to avoid losses.
When to Use a Home Equity Loan for Home Improvements
Repairs to Boost Resale Value
A home equity loan might be a good idea if you are ready to put your property up for sale. Improving the house can give you an edge over other sellers in the current real estate market. However, do not be in a rush to perform unnecessary repairs and improvements. It is important to calculate the potential return on investment. If the enhancements do not increase the value of your property, you will face significant losses.
Focus on vital repairs which could affect the functionality of the house. For instance, you should deal with issues which could cause complications during the inspection. You can overlook superficial repairs buyers will not notice or extensive design improvements that may not appeal to every buyer.
Selling the House Without Repairs
If the home is in complete disrepair, do not take out a loan for improvements. The returns will not be ideal because of the high costs of the restoration. Selling your home as-is will help you avoid the burden of a new loan and the stress of fixing it up. This option is ideal if you are dealing with major issues such as damaged floors, a faulty electrical system and damaged plumbing, as these problems cannot be managed economically and might cause you to lose money unnecessarily. When selling the house as-is, you should target people interested in flipping, and the price should be low enough to attract investors.
Improving for Personal Use
You should consider taking out an equity loan for home repairs if your current residential space is in poor condition and you don’t want to move. A house in a poor state can be dangerous for you and your family. Moreover, it might be in violation of the local building codes. It is also important to note some remodels can make the home more usable for your family.
If the repairs are urgent, a home equity loan (HELOC) is the best option because the interest rates are not high like unsecured loans. However, do not be wasteful by splurging on unnecessary improvements. Remember, the loan will extend the time required for finishing home payments.
If you are on the fence about using a home equity loan for house repairs, consult the experts at Clark County Credit Union by contacting us at 702-228-2228 today.