Home Equity Loan
Use my savings or a home equity line to fix my house?
I need to have work done to the foundation of my house. Should i use my savings to pay to have this done, or should i use my home equity line of credit to do it? If i use the line of credit i will have to pay up to 10% interest on the loan, whereas if i use my savings i wont have to pay any interest and i can just make the payments back to myself. Plus it gives me the freedom to "skip" a payment to myself should i need the money for something else, whereas i can't skip a payment back to the bank. If i were to use my savings, it would wipe it out.
Public Comments
- You didn't say how much of your savings you will be using. If you drain it dry, not such a good idea. But if you have at least 3-6 months living expenses left after the repairs are paid for then it should be fine. You also need to compare the amount of interest you'd be paying the bank against the amount of interest you get from the bank for your savings account. HELOCs interest rates fluctuate with the prime. It could go up or it could go down. Only you know your whole financial picture and what's best for you.
- Another thing to consider is that the payments on your homeequity loan are tax deductible.
- Depends on how much. Keep in mind that it is always better to borrow, if you must, from your home equity because it is tax deductible! Just be sure that you do not over extend your line of credit. You want to be sure that if you had to sell your house tomorrow, the price you get for it would allow you to pay back all home loans and still make a profit. As far as your savings, you always want to keep a minimum of 3 months (better to have 6 months) living expenses stored away for emergencies. If you have over this amount, you would make more money investing it than using it toward your house (taking into consideration the tax relief mentioned above). If you have under this, save save save!
