Rediscover the value and opportunity in your home’s equity

Spotlight on Finance

— Also, many business owners use the equity in their home as collateral for loans. They then use the loans for business purposes such as leasing work spaces, equipment and furniture or buying supplies and services, including marketing services that can help grow their business.

In recent years, refinancing has been all the rage—with good reason. Rates have been extremely low, which has allowed many people to drastically reduce their monthly mortgage payment and/or reduce the length of their loan with little expense. However, home equity loans are still an advantageous solution for many borrowers for a number of reasons:

  1. Possible tax savings (consult your tax advisor)
  2. No mortgage insurance required
  3. No escrow amount required
  4. Payments consist of principal and interest
  5. Fixed payments for monthly planning and peace of mind
  6. Protection from rising interest rates

Also, many banks offer home equity loans that feature no closing costs, flexible term options and same-day credit decisions. Some banks, like KeyBank, even offer payment protection. Your loan payments will be made should you lose your job, become disabled or pass away. For these reasons, banks are seeing an increase in the number of homeowners who are bypassing traditional refinancing options and instead are using home equity loans to pay off their conventional first mortgage.

Borrow with purpose

If you’re considering borrowing against your home’s equity to fund an improvement, finance your business or enhance your lifestyle, you should acquaint yourself with the three “R’s” of home equity financing: reason, rate and relationship.

As outlined above, there are a number of valid reasons to borrow against the equity in your home. The bigger question is whether or not the reason is worthy of the debt. And that is where rate and relationship come into consideration. First, you must weigh the rate and terms of the loan.

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