University or college education doesn’t come cheap, but it’s an invaluable investment in your future. You may be deciding to go back to school so you can follow a new career path, further your existing skills and knowledge, or simply to enrich your life. It’s an incredibly worthwhile venture, but the question often arises of how to finance further education.
Many homeowners end up using a home equity loan to finance their education or their children’s education. A home equity loan allows you to access the equity you have in your home and receive a cash loan that can be put towards education.
As you make your mortgage payments over the years, the equity you have in your home grows. Your home equity will be the current market value of your home minus any remaining mortgage payments. Your equity will not only increase as you pay off your mortgage, but also as the value of your home rises, whether due to the market or due to any improvements or renovations you have put into it.
There is a lot of flexibility with home equity loans. Typically, there are three ways in which money can be borrowed:
Traditional Home Equity Loan: This functions as a second mortgage with a fixed interest rate. You would receive whichever sum has been agreed upon by the lender and repay it as you would a traditional mortgage.
Home Equity Line of Credit: With a home equity line of credit, you are able to borrow the exact amount of funds you need when you need them. The greatest benefit of this option is that you only pay interest on the money you actually borrow.
Refinance Loan: Refinancing allows you to refinance your current mortgage into a larger one then access the difference. Refinancing should be done cautiously and only when completely necessary.
Home equity loans are often preferable to taking out student or personal loans. Home equity loans are tax deductible and may allow you to access more than you would be able to get from a student loan.
However, it’s important to be careful when taking out a home equity loan. With this kind of loan, your home acts as collateral and will be at risk if you are unable to pay the loan back. If you are considering a home equity loan as a way to finance your education, or your child’s education, it’s best to speak to a mortgage professional to see whether it is a safe option for you and your family. Contact our experts today to discuss home equity loans, as well as any of your other mortgage needs!