Unlocking Your Home's Equity: Learn About Home Equity Loans
With each passing day, you put more and more equity into your home and a well-maintained property will only increase in value. That being said, life doesn’t slow down and sometimes you need to access your equity. That’s where a home equity loan or line of credit comes in.
What is a Home Equity Loan?
A Home Equity Loan or Line of Credit (HELOAN or HELOC) are your best options for leveraging your home’s worth—without selling it outright, of course. Put simply, a Home Equity Loan gives you a one-time, fixed-rate opportunity to borrow against the equity you’ve built to date. A HELOC, on the other hand, is a revolving line of credit with adjustable interest rates that allows you to choose when and how often to borrow against your home, up to an approved limit.
Regardless of how you access your equity, there’s a world of possibilities for how to use it. Some are more conventional than others, but when used wisely, they can help improve your financial wellness—and even increase your home’s equity in time.
Here are some conventional (and unconventional) ways you can leverage the equity you’ve already built.
- Home makeover: Probably the most common use, giving your home a makeover with a HELOC is a win-win scenario. For starters, you get that open floor plan or larger living space you always wanted. Then there’s the long-term benefit: by investing in your home, you can increase its value over time, growing the equity you’ve already built.
- Bucket-list vacation: We all have a dream vacation in mind. The problem is that saving takes time and we keep putting that trip on the back burner. By financing it with a HELOC, the flexibility of interest-only or principal and interest payments can make it more affordable—not to mention make it happen sooner.
- Education expenses: There are a lot of options to help pay for your child’s education. When compared to Federal Parent PLUS loans, HELOCs usually have lower interest rates and may even be less than those available on private student loans. It’s also important to note that some colleges factor a family’s home equity into their analysis when determining what type of financial aid to offer students.
- Building an emergency fund: No one likes to think about the unexpected, but accidents do happen. A HELOC can help you establish and build an emergency fund, preparing you for unanticipated events like a large tax bill, car accident, or even damage to your house from a fallen tree.
- Preparing for retirement: As you close in on retirement, you don’t want to rock the boat with your established accounts. However, a HELOC can help you unlock cash flow a few years prior so you can get your home retirement ready. A first-floor bedroom, for example, can help you stay in your home longer, all while you continue building equity.
A lot can be done with the equity you’ve built in your home. If you’re curious about any of these uses, or would like to learn more about Home Equity financing, visit our website or get in touch with one of our lending experts today.