If you’ve read our recent blog comparing home equity lines of credit (HELOCs) to home equity loans, you already know the fine points of a HELOC, including how your home’s equity is determined, its competitive interest rates, potential tax advantages, and how you can access your money. Now it’s time to take a closer look at what you can do with a HELOC:
- Renovate Your Home. Perhaps the most common use, home renovations account for 32 percent of HELOC borrowing. There are a variety of reasons your home may need a little TLC—from big-ticket home improvements, like replacing a broken furnace or water heater, adding square footage for your growing family, updating an outdated bathroom or kitchen, or making your home more energy efficient. So, what’s the best part about renovating your home with a HELOC? The majority of these major changes will actually increase your home’s value, so you’re not only potentially saving money, you’re making money too!
- Replace High-Interest Credit Cards. Credit card interest rates vary greatly depending on the lender, the current financial market, and your personal creditworthiness—but they’re definitely higher than home equity financing. The average credit card APR reached a record high of 17.67 percent in March 2019, whereas HELOC interest rates are historically lower. Whether you utilize your HELOC in lieu of a traditional credit card or use it to pay off your existing credit card debt to decrease interest payments, you’ll save more in the end.
- Consolidate Your Debt. As of 2018, the average American carried $38,000 in personal debt, not including their home mortgages, with only 23 percent reporting no debt. Whether primarily due to credit cards, school loans, or car loans, high interest rates are only adding to your overall balance. Not only can you decrease your interest rate, monthly payment and length of repayment by transferring your debt to a HELOC, you can streamline your monthly bills into one simple payment.
- Pay for College. Whether you’re getting ready to send your kids or yourself to college, there’s one truth you’ll have to face: College is expensive. In fact, the average four-year public in-state, public out-of-state, and private costs in 2018 were $25,290, $40,940, and $50,900 per year, respectively. You can manage these costs more efficiently by making regular tuition payments via your HELOC funds, which typically carry longer repayment terms, like Suffolk Federal’s 20-year-term HELOC.
- Enjoy Your Life! The best part of a HELOC? You can use it for virtually anything! Even if you don’t have any home renovations to make, credit card or other personal debt, or a college graduation in your future, you can still use this flexible, low-rate source of funds to improve your life. Whether it’s your dream car, that vacation you wish you could afford, or an expensive gadget, your HELOC can make it happen.
Now that you understand the variety of expenses and purchases you can use a HELOC for, it’s important that you choose a lender with low rates and flexible terms so you can get the most out of your home’s equity.