A major advantage of owning a home is its ability to build equity over time. And, with a home equity line of credit (HELOC), you can tap into that equity easily to make larger purchases or investments – all with the potential to write off the interest on your taxes.* Here are four ways you can use a HELOC for the things you need:
- Make home improvements that add value. One of the most common reasons people use HELOCs is to make home improvements. Just be sure these improvements actually add value to your home, like– remodeling your kitchen, upgrading the exterior siding on your home or adding energy-efficient appliances or windows. And, even with making valuable home improvements, you want to be smart with your choices. Putting a $65,000 gourmet kitchen in a $200,000 home may not make much sense in the long run, especially if you plan to sell your home at some point.
- Pay for emergency expenses. You may need to tap into your home’s equity to pay for large medical expenses, major car repairs or other expenses caused by a job loss. A HELOC helps you keep an “emergency fund” available in the case of a costly, unexpected situation.
- Pay for college tuition and other expenses. Most people use student loans to pay for the high cost of college tuition and other associated expenses. If that’s the case for you, consider using a HELOC, as you’ll likely get a lower rate and possibly receive tax benefits* as well.
- Invest in a business or in a property. If you’re looking to start your own business or invest in a property or other business venture, consider using the equity in your home to do so. Because of the risk you take when making an investment of this nature, we recommend using no more than 80% of your home’s value for this purpose.
It’s important to look at your home’s equity as a way to invest in your future – not as a petty cash fund for things you want now (but really can’t afford). When you use a HELOC for the purposes we’ve discussed, you’ll typically get a lower rate than using a personal loan, student loan or credit card, because your home serves as the collateral for the loan. Just be sure to understand that your home may be at risk if something goes wrong with the repayment of your HELOC.
When you use your home’s equity in a way that gives you a positive return for your future, you’ll maximize your equity and potentially save money as well.
Contact us and let us help you decided if a HELOC is the right choice for you.
*Consult your tax advisor.
© BancorpSouth 2018
