As you pay off your mortgage, the equity you build in your home gives you the ability to take out a home equity line of credit. A home equity line of credit borrows against your equity to give you a credit limit which you can use at any time. Like a credit card, home equity lines of credit can be used at any time, paid off and reused. They can also be used for major purchases and paid off slowly and comfortably with the minimum payment.

A home equity line of credit is secured to your home, so it may come with lower interest rates than an unsecured line of credit like a credit card.

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Many home equity lines of credit (HELOCs) are used for expenses such as:

  • Home improvements
  • Debt Consolidation of medical bills, tuition payments, etc.
  • Emergency funds
  • Investments

Using a HELOC as a Home Improvement Loan

Home improvement is the most common reason that people use HELOCs. If you are doing home improvements, you might be expecting to pay a contractor periodically. With a revolving HELOC, you have access to funds and will be able to maintain a fairly low utilization rate. You may also leave your available money in the credit line so you don’t have to pay interest if you’re not spending any of it. A HELOC provides some freedom in comparison to a personal loan.

Financial Benefits of a HELOC

Using a HELOC for Debt Consolidation

HELOCs can be used to replace other debts. If you would like to consolidate your credit card debts and student loan debts into a lower-rate line of credit, you might want to use a HELOC.

Using a Home Equity Line of Credit as an Emergency Fund

HELOCs can also be opened to give you access to a large amount of funds at a moment’s notice. If you don’t have an available emergency fund, you may use a HELOC as a backup emergency fund for the draw period of the loan. The draw period, or amount of time that your funds are available, can be anywhere from 5 to 15 years.

Tax Deductions for Home Equity Lines of Credit

The interest paid on a HELOC may be tax deductible. Please check with your tax advisor. Tax deductibility is another benefit of a HELOC.

Interested in opening a low-rate home equity line of credit?


Start Your Home Equity Line Inquiry today!