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Home Equity- Understanding Your Options

If you’re like most homeowners, your home is your biggest asset. It can also be the best source of funds for things like debt consolidation, vacations, college, and more. Traditionally, home equity was viewed as something only used for the purpose of doing home improvements. Today, home equity is becoming an increasingly popular option for funding other expenditures.

How do you figure out how much equity you have in your home? The amount of equity you have in your home is basically the amount of your original mortgage (what you borrowed from the bank) subtracted from the current value of your home. This is the portion of your home that you truly own.

There are a few ways to increase the amount of equity in your home. For example, you can make improvements that increase the overall value of your home. You can also make additional payments on your mortgage to decrease the amount owed faster. If possible, making a larger down payment will decrease the amount you owe to the bank as well, although we know this isn’t always an option. Making bi-weekly payments instead of one monthly payment can turn a 30-year mortgage into a 25-year mortgage!

When it comes to tapping into the equity in your home, you have two options. You can take out a home equity loan or a home equity line of credit, also known as a HELOC. Both of these allow you to access the equity in your home, just in different ways.

A home equity loan is a loan for one lump sum, which is paid out to you up front. You would then pay this off in installments until it is payed in full.  A home equity line of credit is a line of credit extended to you that you can borrow against. You can borrow smaller amounts and only have to pay back what you borrow, instead of taking the full amount at once. 

Figuring out which option is best for you depends on what you intend to use the funds for. If you have a set amount in mind that you need to pay off high-interest debt for example, a home equity loan might be the better option. If you’re looking to do some home improvements and you’re not sure what costs you may incur, a home equity line of credit might be the better option. You can borrow funds as you need them to complete the project and might end up borrowing less than anticipated.

As with any other major financial decision, it’s best to speak to a lending professional before you make any decisions. Each situation is unique and having a professional sit down to go over your needs will help you achieve the best outcome. If you’re looking to tap into your home equity, we can help! Contact us today to setup a time to speak with someone or apply today.  

Learn More

Citizens Savings Bank has multiple locations throughout Lackawanna, Wayne, and Monroe Counties. For branch locations and hours, visit our website. We also have a Customer Support Team ready to answer any questions you may have. Call us today at 1-800-692-6279 or email [email protected]. Member FDIC.