Smart Ways to Use the Equity in Your Home

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Older couple looking at plans to renovate their home.

A major benefit of owning a home is the 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 might need:

Make home improvements that add value.

One of the most common reasons people use HELOCs is to make home improvements. Consider improvements that add value to your home, like remodeling your kitchen, upgrading the exterior siding on your home or adding energy-efficient appliances or windows. Even with making valuable home improvements, you want to be smart with your choices and consider how long you will be in the home and if you will receive a return on your investment.

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 can help 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. Instead, you may want to consider using a HELOC, as you might get a lower rate and possibly receive tax benefits*.

Invest in a business or in a property.

If you’re considering starting your own business or investing in a property or other business venture, you may want to use the equity in your home to do so. Because of the risk you take when making an investment of this nature, you should consult a lender on what percentage of your home’s value you should use 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 may get a lower rate than using a personal loan, student loan or credit card, because your home serves as collateral for the loan. Consider 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.

Contact us, and let us help you determine if a HELOC is the right choice for you.

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*Consult your tax advisor.