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Home Equilty for tuition, emergencies and more

Homes030115-1By Lisa Scontras

For high school seniors who are getting ready to go to college in the fall, this is an exciting time. But for their parents, there are different emotions — one of which is likely concern and uneasiness about how much higher education is going to cost.

Rightfully so. Paying for a college education is a sizeable expense. And while many parents start saving for college years ahead of time, finances can run dry and savings can fall short. Forbes magazine reported recently that the national average cost of attending a four-year public college is more than $28,000 per year — or $112,000 for four years. For a private college, that number may be around $59,000 to $68,000 per year.

Many Hawaii parents pay tuition to private schools even before college, with some private school tuitions rivaling college tuitions.

Derek Wong, Vice President of Credit Products at First Hawaiian Bank, said tuition can be a very large portion of a Hawaii family’s expenses, and that many parents (and grandparents) are turning to their home equity as a solution.

“Tapping into your home equity is often a good option,” said Wong. “Since a home equity line of credit (HELOC) is secured, the interest rates will likely be amongst the lowest you can find after considering other financing options. Lower rates translate to cost savings for the borrower, or in the case of paying tuition, the parent.”

Personal loans or private student loans, which may come with high interest rates due to the increased risk to the lender, can burden new graduates with huge bills to pay when just starting out on new careers. But because a HELOC is secured by the equity in the home, it will most likely be at a lower interest rate and the monthly drain on budgets less cumbersome.

“Federal student loans may have low interest rates, but there are loan amount maximums that a student or parent can easily exceed, especially for students with private or outof-state college tuition expenses,” added Wong. “With a HELOC, you may qualify for a larger loan amount.”

What makes a home equity line of credit a great solution for education expenses, or for any ongoing or future expenses, is that as you pay down your balance, your credit line is replenished and you are able to continue to borrow up to your line limit, according to Wong.

“Plus, not only do you benefit from generally lower rates versus other financing options, but the interest may be tax deductible,” he said.*

“It is always good to have a HELOC on hand, even if you do not have an immediate need for it, because you never know what unexpected expenses might arise in emergency situations,” Wong continued. “And you don’t make any payments or accrue interest on the line until you draw on the funds. At First Hawaiian Bank, you also have the option of locking in a fixed rate on all or a portion of your line.”

Having the assurance of a HELOC in place makes good sense and can be a lifesaver when faced with sudden or catastrophic expenses. Storm damage, unexpected home maintenance and repairs, or emergency medical expenses — all of these can drain the most conservative budget.

Homes030115-mediansalesprice“It is nice to have peace of mind that you have a source of funds available when you need it,” Wong said.

According to the Honolulu Board of Realtors, the Median Sales Price of a single-family home is up 325.6 percent from 1985 through 2014. Condos are also up 298.8 percent during the same 30-year period. If your home is equity-rich, opening an equity-based line of credit is a sensible way to have your money work for you.

Personal bankers at First Hawaiian Bank will make opening up a home equity line of credit easy. They will help you determine the best financial options to fit your needs and assist you through the entire application process.

Find out if you qualify for home equity financing today, and be prepared for whatever financial surprises may come along tomorrow.

* Consult a tax adviser on the tax deductibility of interest.

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