Leveraging Your Home Equity

Vantage West home equity loans help build your future

Home equity loans can serve as a powerful tool in providing homeowners with extra funds to make home improvements and other investments that they might not otherwise be able to afford.

However, it is important to remember that a home equity loan is not free money and these loans should be used only for specific situations. In this article, we will discuss how these loans work and the right time to tap into your home’s equity.

What is a home equity loan?

A home’s equity is defined as the difference between the home’s value and the amount that is paid off. For example, if your home is worth $400,000 and you have $100,000 left to pay off the mortgage, then you have $300,000 in built-up equity.

Many lenders set the credit limit on a home equity line by taking a percentage (say, 75 percent) of the home’s appraised value and subtracting from that the balance owed on the existing mortgage. For example:

Appraised Value of Home: $100,000
Percentage: 75%
Percentage of Appraised Value: $75,000
Less Balance owed on mortgage: -$40,000
Potential line of credit: $35,000

Home equity loans allow you to tap into this built-up value through two types of loans. The first type is called a term, or closed-end loan.

In this scenario, a homeowner receives a lump sum, which is paid off over a set amount of time with a fixed interest rate.

The second, most common type is called a Home Equity Line of Credit (HELOC) loan. HELOC works like a credit card, as you are able to borrow up to a certain amount for the life of the loan. Rather than a lump sum, you withdraw money as needed. HELOC loans also involve a flexible interest rate that fluctuates over the course of a loan.

What should home equity loans be used for?

Technically, home equity loans can be used for anything once the homeowner is approved. However, they shouldn’t be considered a personal piggy bank since the loans do need to be paid back. A good rule of thumb is to use home equity loans only for investments that increase your home’s value. Avoid using the proceeds for everyday expenses like gas, groceries or vacations.

Here are some common, smart ways to use home equity.

1. Home Improvements – Remodeling or fixing up your home generally adds value to your property. However, some types of home improvements are not equal to others. For example, updating your kitchen cabinets or adding energy-efficient appliances add more value than installing a swimming pool.
2. Emergency Expenses – We all know that unexpected emergencies are a part of life. Home equity provides a secure cushion in case of sudden medical expenses, job loss or other difficult situations. Because you are able to withdraw from a HELOC loan as needed, you can use the money as an emergency line of credit if necessary.
3. Credit Card Debt – Since home equity loans generally carry lower interest rates than credit cards, it can make sense to use the proceeds to pay off credit card debt. But be careful not to use this as a reason to continually run up your credit card balance.

Vantage West Home Equity Loans

Vantage West offers premium HELOC loans starting at $10,000 for qualifying homeowners. Your property must be located in Arizona and be owner-occupied, along with being your primary residence.

Once approved, you can tap into your equity with a Home Equity Visa card and have the flexibility to  transfer funds via Vantage West’s online banking system. You can even keep your line of credit available as an overdraft protection source.

We look forward to providing you with financial security with a HELOC loan or any other financial needs. For more information about our loan programs, to apply online, or to speak with a home loan officer, visit our website.

Loans subject to approval. Certain restrictions may apply.