There are certain events in life that are traditionally accompanied by large gatherings. Weddings, milestone anniversaries, Bar/Bat Mitzvahs, and quinceañeras, to name but a few, are often celebrated by large guest lists, extensive menus, and elaborate entertainment.
All too often, the hosts of these events use credit cards to fund the proceedings. That means ongoing bills and high interest rates for years to come. As time goes by, the hosts lose sight of what a wonderful day it was for everyone as they make payment after payment extended by high interest rates.
People often burden themselves unnecessarily because they don’t know that there is a much more economical solution to funding their galas: a Home Equity Loan! That’s right: you can use the financial power of your own home to help cover the expenses of your big event.
Texas law allows for a total mortgage debt – which includes the home equity loan – of up to 80 percent of the fair market value of the home. This can bring a lot of spending power to bear on a celebration, depending on how much equity you’ve built up over the years. And, because you’re offering up your home as collateral, you’ll get a much lower interest rate than you will from any other type of loan. Furthermore, your payments can be tax deductible1 – a deal you’re simply not going to get if you use a credit card to pay for your event.
One way or another, you’re going to have to pay for the event, so why not do it in the most reasonable way possible? Consider the advantages of using a Home Equity Loan for this purpose:
Helps you set a budget: If you set a spending limit and borrow that amount by way of a Home Equity Loan, you’ll know exactly how much you have to spend and will, therefore, budget accordingly. Keeps the credit card out of it: The upside of a credit card is that it makes purchasing easy – which, ironically, is also the downside. If you whip out the credit card every time you need something for the party (new clothes, catering, entertainers, gifts), chances are you’re not tracking your spending the way you should. The lump sum you borrow via your Home Equity Loan will allow you to leave the credit card at home and be more mindful of what you have to spend.
Possibly gets you cash discounts: Because you have armed yourself with a Home Equity Loan, you will be in a position to pay cash for many of the items and services you need to make your party spectacular. Some vendors respond to cash in a different way than they do credit cards. You may be able to negotiate discounts for yourself because you are a cash customer.
Reduces your stress: These factors – including the low interest rate – make for a less stressful mindset for you and will help you enjoy hosting much more than you will if you spend most of the event wondering how you’re going to pay for all that you see before you.
Of course, you still have to pay off your Home Equity Loan! Know that failing to do so could result in the loss of your home. But also know that going into deep debt by taking on more traditional credit burdens will make for a much harder repayment schedule than your HEL will.
1. Home Equity: APR is Annual Percentage Rate. Loans Subject to approval. Combined Loan-to-Value (CLTV) cannot exceed 80% of your home’s value. Additional terms, conditions, and restrictions may apply. Amplify Membership and Property Insurance required.
HELOC: The home equity line of credit Annual Percentage Rate (APR) is variable and is based on the highest Prime Rate published each month-end in The Wall Street Journal Money Rates Table (the "Index"), plus a margin. The current Index is 3.50%. Maximum APR is 17.90%. This Account has a Draw Period of 10 years, after which you will be required to repay any amounts within a 10-year term. Interest on your HELOC may be tax-deductible – please consult your tax advisor for details. Property Insurance, including flood insurance as needed, is required. Loans Subject to approval. Additional terms, conditions, and restrictions may apply. Amplify Membership required. Consult the CFPB's Home Equity Line of Credit booklet as well as the Early HELOC Disclosure for more information.
Under Texas law, the maximum you can borrow with a HELOC is 50% of the fair market value of your home, as long as the combined loan-to-value does not exceed 80% in cases where there is an existing first lien mortgage on the home. A minimum draw amount of $4000 is required for each advance after the initial $10,000 advance at origination.