*First National Community Bank’s blog does not constitute legal, tax, accounting, investment or other professional advice. Recipients should consult their professional advisors for advice.

If you have built up equity in your home, refinancing your mortgage can be a good way to put those funds toward a multitude of uses and get your monthly expenses in check. Home equity is the positive difference between what is owed on a home and its current value. Tapping into your home’s equity can provide the funds that you need for a large expense with no additional strings attached. Even though mortgage rates have gone up, it may still be beneficial to utilize a Home Equity Loan. We have outlined the top 4 ways to use a Home Equity Loan:

1. Consolidate Or Pay Off Debt

When you consolidate or pay off multiple high interest rate debts by using a home equity loan to combine the debt into a single, no-interest or low-interest loan you can save thousands of dollars. It can also help shorten the repayment time by several years. A borrower should beware, however as mortgages are secured debt, backed by the borrower’s home while credit card debt is unsecured. Transferring high interest unsecured debt to a loan that is backed by your home means the borrower can stand to lose their house if they default on the debt. It is important to have a financial plan in order to avoid this pitfall.

2. Make Home Improvements

Using your home’s equity for home improvement projects is a popular choice for multiple reasons. Perhaps the most important reason is that the money you put into the renovations acts as an investment, meaning if you choose improvements that increase your home’s value, you can make back the money you spent or even see a return when you sell your home. In this case, you also may be able to deduct the interest paid on the loan from your taxes. Plan to avoid spending excessive amounts of money on the latest looks and trends and focus your dollars on making improvements that add value to your home such as adding a shower to a half bathroom, remodeling your kitchen and bathrooms, putting on a new roof, replumbing, etc. These types of improvements will continue to add value to your home for years to come.

3. Establish An Emergency Fund

The pandemic has taught us that emergencies can happen in the blink of an eye. With most financial experts recommending that we have at least six months of living expenses saved in case of an emergency, a home equity loan can quickly establish your emergency fund. In this way, if you experience a financial emergency after taking out your home equity loan, you’ll have the funds on hand to help. In addition, refinancing to a mortgage with a lower interest rate can save you money each month which could help you meet your overall expenses and allow you to put additional money into savings each month.

4. Pay For College

Paying for a college education with a home equity loan instead of a high-interest student loan can be beneficial. Similarly, homeowners struggling with high monthly student loan payments also may want to use the equity in their home to pay off the debt quickly. It is important to note that federal student loans are sometimes eligible for partial or complete forgiveness so paying off a federal student loan with home equity might not be the ideal choice and depends on how much you owe and other factors such as how much of your loans may be eligible for forgiveness.

To learn more about First National Community Bank’s Mortgage and Home Equity Loan options, visit:  https://fncbank.com/Personal-Banking/Mortgages

A home equity loan can provide homeowners with the funds needed to consolidate debt, pay for a home improvement project, build an emergency fund and/or pay for college. As your locally owned community bank of choice, the success of your financial future is top of mind. We offer Personal Checking Accounts, Money Market, Personal Savings Accounts, CDs, IRAs, Business Loans, Mortgages, Personal Loans of all shapes and sizes and much more! To learn more about First National Community Bank’s financial solutions, contact us here.

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