Turn Your Debt Into a Tax Deduction with a Home Equity Loan!

Families who got the child tax credit last year need to watch for this letter from

If you’ve been following the housing market recently, you’re likely aware that home values have increased significantly. According to a recent article in the Washington Post, this trend is expected to continue in 2018.

This means homeowners could be sitting on a considerable amount of untapped equity. This is great news for those looking to sell their homes, but it can also be beneficial for those considering a home equity loan.

Home equity loans are commonly used for home improvements, such as repairs, maintenance, or remodeling. However, there are other potential uses for a home equity loan that homeowners may not realize.

For example, a home equity loan can be a way to fund your children’s education or consolidate multiple debts into a single monthly payment.

If debt consolidation sounds appealing, a home equity loan might be a good option. LendingTree can help you compare different offers to find the best rate and loan for your needs.

What is a Home Equity Loan?

There are two main types of home loans available. The first is a standard home equity loan, which provides the homeowner with a lump sum of money for a specific purpose. This is similar to a traditional mortgage.

The second type is a home equity line of credit (HELOC). Unlike a lump sum loan, a HELOC provides a revolving line of credit for a set period, typically 10 years. This offers flexibility, as you can draw from the credit line as needed rather than all at once. Since your home is used as collateral, HELOCs generally come with lower interest rates compared to other types of credit. You also only pay interest on the amount you use.

Additionally, the interest paid on a HELOC can often be deducted from your taxes, particularly if the funds are used for home improvements.

Uses for a Home Equity Loan

Many people are unaware that a home equity loan can be used for more than just home improvements. With good credit, you can obtain a home equity loan for almost any purpose since the loan is secured by your home. This makes it a versatile financial tool, especially since some of the interest may be tax-deductible.

The flexibility of a HELOC makes it especially useful for expenses that don’t have a fixed cost.

Funding a College Education

With college expenses higher than ever, obtaining a loan has become almost a necessity for many. A home equity loan often has a lower interest rate than student loans or personal loans, and the interest may be more tax-deductible.

Paying Medical Bills

Health insurance costs have risen dramatically in recent years, along with deductibles and co-insurance rates. This has created financial challenges for many who need healthcare. A home equity loan can provide a way to manage these expenses, with the potential for greater tax deductions.

Consolidating Debt

High-interest debts, such as credit card balances, can be consolidated into a home equity loan to reduce interest costs and simplify repayment. LendingTree can assist in finding the best loan options by allowing you to compare rates and terms online, potentially saving you significant amounts in interest.

Accessing Your Home’s Equity

If your home qualifies and you have a good credit score, you can likely obtain a home equity loan or HELOC. A new appraisal will be conducted to determine your loan value, reflecting the increased value of your home since the last appraisal.

Conclusion

Tapping into your home’s equity can improve your quality of life in various ways, from funding education and paying medical bills to consolidating debt and renovating your home. Additionally, the interest you pay on these loans can often be deducted from your taxes, providing further financial benefits. Use this opportunity to leverage your home’s equity as a smart financial tool.

Leave a Reply

Your email address will not be published.