When to Avoid Using Home Equity for Home Improvements

Your home equity is one of the most important assets that you have. In most cases, it has taken you many years to build up your equity to the level that it is at today. Using your home equity should only be done for reasons that make good sense financially. One popular use of home equity funds is to improve your home. While this can be productive, in some situations, it is not a good idea. Here are a few times when you should avoid using home equity for home improvements. 

You Plan on Moving Soon

One time that you might want to stay away from tapping into your home equity for home improvements is when you plan on selling your house in the near future. If you tap into your home equity and the value of your home goes down, you may not be able to sell your house for some time. You will be "upside down" on your house, and you may be forced to stay there for the foreseeable future. This can hamper your future plans and prevent you from taking a better opportunity somewhere else. If you are unsure if you are going to be in your house for the long-term, you should probably just leave your house the way it is.

Improvements Do Not Add Value

Many people take out a home equity loan and do not plan on using the money for smart improvements. You need to focus on doing things that will actually add value to the house. There are many things that you can do to the house that make it look better but do not actually add value. For example, getting new carpet or drapes will improve the overall look of the house. However, it will not actually provide you with any tangible value when you go to sell the house. 

However, if, for example, you use the money to add on a room or install hardwood flooring, you will be adding to the value of the house. When you use the money to add value, you will be helping yourself in the long run as well as the short term. 

High Interest Rates

You may also want to stay away from using a home equity loan for home improvements when the interest rates are high. The home equity interest rates fluctuate frequently based on a number of different factors. When the market interest rate is high, you may want to just stay away until the interest rate goes back down.

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