Mortgage Tips: What's a HELOC?

When homeowners have built up equity in their homes, they can use that equity to get a Home Equity Line of Credit (HELOC). This is a great tool that can help you accomplish a lot of financial goals. Below are a few ways homeowners can use a HELOC:

Merge Existing Debts
Different kinds of debt such as credit cards or other types of loans can be expensive, unless of course you are fortunate and have no-interest loans. If that’s not the case, then you can consolidate your existing debt into a HELOC which is a secured debt making it much more affordable.
Keep in mind, this only works if you stop adding to the debt. The idea is to use the HELOC to get rid of some of your debt quickly.

Emergency Funds
Although no one plans get into credit debt, things happen like emergency repairs for your home, loss of a job, or other types of unexpected events that can create unwanted debt. A HELOC gives homeowners an option to use it as an Emergency Fund. If one of these unexpected emergencies come up, you can use that HELOC as a cost effective source of funds.

Elective but Effective Home Repairs
It’s true that some home repairs add value to your property, but they can cost a pretty penny. That would be where a HELOC would come in as an additional source of funds. Since these types of repairs are adding value back to your home, you can make good use of your equity by using the HELOC to fund those repairs.
Note that for this to work correctly, you should only do repairs that will add "market value" to your home. With the repair costs coming from your equity, you should be able to make that money back if and when you choose to sell.

Investment Funds
Another way to use the funds from a HELOC is to invest. Now keep in mind, this option poses more risks since the loan gets paid no matter how successful the investment is, but if you have never invested before it gives you an opportunity to start.
Retirees can also use a HELOC to help with retirement income if their investments are struggling. This solution would only be temporary until those investments could recover, but for someone on a fixed income this option could be very helpful.

As you can see, a HELOC can be a great tool that lets homeowners use their equity when they need it. If you have spent the time building up that equity, you shouldn’t have to worry about using it since it can help you with your financial goals. Are you thinking about tapping into your home equity? Talk to your mortgage provider to find out what options would be best for you. And when you are ready to use that HELOC to prep your house to sell, or to invest in property, Contact Us! We would love to help you on your real estate journey.



*Please note that we are not mortgage brokers or lenders, and these tips are based on our experience as Real Estate Agents working with and talking to local lenders as well as borrowers. Make sure to consult with your chosen lender or mortgage broker to confirm the best ways for you to use a HELOC.