One of the main benefits of homeownership is the ability to grow your home’s equity and utilize it for any of your financial needs. Equity is the difference between a home’s value and outstanding mortgage balance. Rising home prices in Hawaii are contributing to an increase in home equity. With low interest rates and higher equity levels, it’s an opportune time for homeowners to consider a home equity loan.
Similar to a regular mortgage, home equity loans usually have a fixed interest rate and term, keeping monthly payments predictable over a set number of years, versus a variable-rate Home Equity Line of Credit (HELOC). Borrowers receive a lump sum of cash at closing that they can use to cover big-ticket items including home renovations, repairs, or even to help purchase additional real estate.
“With rates for home equity loans in the sub-2 percent range, now is the perfect time to address present or future needs,” says Reed Myers, Principal of Myers Capital Hawaii, an award-winning residential and commercial mortgage company located in downtown Honolulu. “Equity is essentially what your home is worth minus what you owe. It’s like a savings account that grows as your existing mortgage balance goes down and your home value rises. However, you can’t touch it unless you sell your home or utilize a home equity program. For many, they have hundreds of thousands of dollars in untapped equity.”
Borrowers mainly take out a home equity loan to cover larger home-related expenses like remodeling a kitchen or bathroom, building a new deck or swimming pool, or fixing a leaking roof. These upgrades can increase the value and livability of a home. Another benefit is the loan interest used to improve the home may be deductible (consult with your tax advisor for details). Loan funds can also be used to pay college tuition, medical expenses, and even a family vacation or new car.
Homeowners who plan on retiring in the next ten to 15 years may want to consider a home equity loan. The cash from a home equity loan could open up vast opportunities, from investing in other real estate and construction projects, to business opportunities, debt consolidation, and even elderly care.
“Borrow while you are in your peak earning years,” Myers adds. “Once you retire and switch to a fixed income, you may not be able to qualify for the loan you really need. Furthermore, interest rates are trending upward and will likely accelerate as the economy improves.”
The fixed-rate aspect of a home equity loan offers a sense of comfort and consistency versus a HELOC, which allows you to draw from and make monthly payments. “Since you’re borrowing tens of thousands of dollars, you don’t want to expose yourself to a variable HELOC program where rates can adjust up to 19%,” Myers advises. “You could easily see your monthly payment increase, putting a strain on your monthly budget.”
Since 1998, Myers Capital Hawaii takes an all-encompassing approach to solving the mortgage needs of its clients. Whether you are a first-time homebuyer, seasoned real estate investor, or business owner who needs capital, Myers Capital will work with you to find the right loan program to help you achieve your financial goals.
Contact us for a consultation today at 808-566-6611.
Article published in the Business section of the Star Advertiser, Tuesday, March 23, 2021. Click here to view article.