Tapping your Home’s Equity to
Invest in Your Business
There are tremendous options
for women who need money to start a business, or invest in an already established
enterprise. If you’re a homeowner, tapping into the accumulated equity
in your home may be a great idea. Cash-out refinancing, home
equity loans, and equity credit lines can all help you get the financing
you need.
More and more women are branching
out on their own and establishing successful businesses. It’s not
as hard as it may seem, especially if there’s financing behind your vision.
Thanks to the value of your own house, you can get seed money for your
venture right in your own backyard.
Home Loan Mortgage Refinancing
One option to tap into funds
is to refinance
your current mortgage, especially if refinancing rates are lower than those
of your original mortgage. If your house has appreciated over your original
purchase price, or you’ve paid down a nice chunk of principal, you could
do a cash-out refinancing and have access to cash above and beyond your
current mortgage balance. On the flip side, refinancing usually involves
closing costs. If your existing loan has a great rate, it may be best to
keep it and consider adding a second
mortgage loan instead. By refinancing, however, you’ll have only one
monthly mortgage payment, and that could simplify your finances.
Home Equity Loans
If tacking on the extra closing
costs of a mortgage
refinancing makes you shudder, consider a home equity loan. Similar to
a first mortgage, a home equity loan gives you a lump sum of cash up front,
which is then amortized and repaid over 10 to 30 years.
The interest rate is fixed,
and your payments are predictable. Retail entrepreneurs can cover
the huge upfront expenses of purchasing inventory; others can gain capital
needed for starting up. The long, multi-year payback term enables you to
repay the debt as business blossoms.
Home Equity Line of Credit
If you need cash, but don’t
know exactly how much, and prefer to have it on a revolving as-needed basis,
a home equity line of credit (HELOC) may be just what your inner entrepreneur
ordered. It acts more like a credit card with a large limit rather than
a traditional mortgage loan. Instead of a single payout, you get
access to a line of credit secured by your home. During the first
5 to ten years, you can withdraw money from the credit line as needed,
and pay only interest. After 10 years, the balance reverts to a more traditional
mortgage instrument.
Tax Advantages
All of the above loans may
enable you to deduct some of the interest payments from your taxes, even
though you aren't using the funds to improve your home. Speak to
a financial professional to determine how these types of loans will affect
your taxes.
Whether you need predictability
or flexibility, tapping into your home equity can be simple and lucrative.
Like charity, start-up money can begin at home.
By MortgageLoan.com
Staff Editor
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