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Timing is a tricky thing. When it comes to finances, it’s sometimes hard to know whether one should be proactive or reactive. There’s even a tendency to put things off until things have hit rock bottom or until every star has aligned.

This isn’t to say there’s a right way or a wrong way when it comes to taking on a loan or accumulating debt. These are big decisions and there’s quite a few variables to wade through.

Let’s look at some factors that should be considered when deciding if now is the right time to apply for a home equity loan.

Why do I need the Loan?

This might be the biggest question. You never want to take a loan or put your house up as collateral unless the reason is a good one. There are a ton of good reasons—medical emergency, business opportunity, home renovations.

If the reason feels legitimate then the timing is probably legitimate as well.

Will I get the Best Interest Rate and Repayment Plan?

It’s a simple question: will you get the best deal when you apply? If you believe that there’s a better interest rate around the corner or that you can improve your credit score, then the best advice might be too wait.

Timing isn’t just about what’s happening in your life. It’s also about what’s happening with the lender and if you can secure the best deal.

What if my Situation Changes?

If you need the money today but believe that your situation can change, then it still might make sense to borrow money against your home. In this case, the solution might be a home equity line of credit where the funds will be available to you. Like any line of credit, you only must pay back what you use so if your situation changes then no harm done.

Applying for loans is a big deal and the timing must be right. Be honest with your situation and logical and, most importantly, speak with a professional who can help guide you to the right decision.

If you have been reading this blog for some time, you have probably learned that there are some serious benefits to a home equity loan. Surprisingly, it’s still an avenue that many people have left untraveled. It might be the most proven yet underused way for homeowners to access money in times of need.

When you want a loan, most people have several options. Lines of credit, credit cards and even borrowing from someone they know. Each has benefits and drawbacks but none have the specific benefits of a home equity loan or line of credit.

A Home Equity Loan is like Enjoying the Perks of your Investment

For most, their home is their greatest asset. To be able to leverage your investment to access a loan is to leverage your own personal equity. The process comes with a greatest level of ease. For years, you pay your mortgage every month, so why not have it work for you when you need it? This is one of the benefits to purchasing instead of renting.

Since these are secured loans, approval is easier and you will be more trusted in the eyes of the lender.

A Home Equity Loan Allows you to Potentially Borrow More

The way a home equity loan works is you get to borrow against whatever you have invested into your home. If the value of your home is $500,000 and you’ve paid $200,000 of your mortgage, then you can borrow $200,000.

Not many loans give you access to that kind of money. Your home equity affords you greater borrowing ability.

You’ll Probably Enjoy a Lower Interest Rate

Home equity loans generally yield a lower interest rate, which means you can enjoy more of the money while you pay more towards the principle. With interest rates being the biggest detriment to borrowing, this is obviously a huge boon and should be a deciding factor.

There’s lots of options and each situation is different. Consider a home equity loan and see if it’s the best option for your life.

Home equity loans are incredibly valuable to those who qualify. It’s a secure and oftentimes flexible way to borrow against the investment of your home. Since your home is being used as collateral, you don’t want to take this loan lightly and it’s best to enter the arrangement with a strategy in hand.

What does a home equity loan strategy look like?

Understand how the Money will be Spent

The reason you are applying for a home equity loan is important, and subsequently, so is how the money will be used post approval.

Whether it’s to pay for medical expenses, exotic travel or even to pay off credit card debt, give thought to how the money will be spent. Consider if there’s a chance to experience any kind of return from this loan like the kind you could enjoy from investing in markets or opening a business.

What does the Repayment Plan look like?

No one likes repaying a loan but when you are discussing a home equity loan with the lender, try coming to the table with an idea of how you want to repay. This can sometimes be negotiable so be candid about your desirable terms and see if they are doable.

What is your Overall Goal?

Whatever your goal might be, build your strategy out from something achievable. If you are applying for a home equity loan to renovate your home then understand the cost of renovations, how long they will take and what the return will be. From there, you can determine how much you need and if you should apply for a loan or a line of credit.

Devising a strategy before taking out a home equity loan can help relieve some of the mystery and stress. It’s a way to retain control and know that you have stepped into the situation fully prepared for whatever can happen.

Even if you deviate from the plan, you’re still better off taking the time to learn and strategize.

One of the best reasons to apply for a home equity loan is to improve your home and raise its value. If this is your goal than you want to make sure every dollar is invested in the right improvements and not into areas that won’t yield a return.

This means that even if you want to finally install surround sound in your home theatre, it might make more sense to grout bathroom tile.

There are several areas of home improvement that can potentially turn your home equity loan into a healthy investment.

A New Kitchen Can Revitalize your Home

There is no room or aspect of a home that figures more greatly into its value and sale than the kitchen. It’s usually the showstopper and the centerpiece that can inspire bidding wars. When looking to increase the value of your home, the conversation should start (and possibly end) with a kitchen revamp.

Finish that Basement

An unfinished basement can look like a crime scene and there’s nothing worse than when you’re giving a tour of your home and your guest asks about your unfinished basement.  The price of a basement was built into the price you paid so wouldn’t you rather it be more than boxes, hockey equipment and a rusty furnace?

Using money from a home equity loan to turn a dank basement into a functional living space will pay off in spades.

Don’t Overlook Small Improvements

From sealing a driveway to a new backsplash even more modern appliances, smaller changes cost money but they can result in a more valuable home. Now, the growth might not be enormous but the little things can add up and make a difference in the price of your home.

There are dozens if not hundreds of small improvements you can make in your home. The best strategy is to create a room by room checklist and knock them off over a short window of time.

For most, a home is their most prized asset. By investing further in it you are securing your nest egg or retirement plan. This is never a bad idea and a home equity loan is a proven way to achieve this.