USA Today released a report showing that in 2015 there was a 20% increase in people choosing to tap their home equity from the year prior. With so many options to get money, why are people turning to their home’s equity? The answer is simple—the economic climate has created this wonderfully perfect storm for people to take equity out of their home. There are 3 factors that are making this one of the best lending options for homeowners.
3 Factors That Make Home Equity Loans Your Best Option NOW
1. Home Prices Are Rising
One reason why home equity is starting to take the U.S. by storm is because the cost of homes have risen. Home prices across the country have increased by 17% over the past three years, with San Francisco leading the pack at a whopping 50% increase. This increase in home values means that homeowners now have more equity. Instead of purchasing a new home, many homeowners are renovating their current homes through home equity loans and lines of credit. To determine your homes value use a home value calculator in conjunction with a home equity calculator to see how much equity you could tap. Contrary to popular belief, home equity loans don’t have to be used for home renovations. You can use them to do anything from purchasing a new car to paying your children’s college tuition.
2. Interest Rates Remain Low (At Least For Now)
Home loan rates have dropped dramatically since 2007, making today one of the lowest rate environments in recent years. This combination of very low interest rates and increasing home prices makes now the perfect time to tap into your home equity. This won’t last forever as rates are expected to rise over the next year. Experts are projecting that by the end of 2016, home loan rates will be up to 5.1%, a 47% increase in just one year. If these experts are correct, getting home equity loan offers now will save you tons of money over the life of your loan. To take advantage of low rates over the life of your loan, make sure you take out a fixed rate home equity loan so that your interest rate does not rise with the market rates.
Don’t wait until it’s too late—shop now and get the cheapest home equity loan possible
3. Tax Deductible Interest
With tax season coming to a close, we all know how nice it is to get money back from Uncle Sam! If you itemize your deductions, home equity loans may be tax deductible just the same as your regular mortgage interest. Federal law allows you to deduct interest up to $100,000 in home equity ($50,000 if married and filing separately from your spouse). If you go this route on your taxes, home equity loans become even less expensive because you could potentially get back the money you paid in interest.
Rising home prices, low interest rates and possible tax benefits means there is no better time than now to take out a home equity loan. With experts predicting a rise in interest rates in the near future, there is no reason to put off a home equity loan any longer. At the very least, get home equity offers and see how much you can qualify for. It may surprise you.