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Get Fast Cash with a Home Equity Line of Credit

The real estate market is gaining steam and home values are rebounding. This makes it a great time for homeowners to tap into the equity they’ve built up. Borrowing against your home equity can be a smart way to finance that new kitchen, bathroom, or any other major renovation project. A home equity line of credit—known as a HELOC—gives you the flexibility to tackle home repairs and renovations on your timetable, and the money is there when you need it. 

It’s important to note a HELOC is different from a home equity loan, which is essentially a second mortgage for a fixed amount, at a fixed interest rate, with set payment terms and timelines. A HELOC is a second mortgage as well; but one with a revolving balance and an interest rate that is tied to the prime rate. 

Here are some reasons why a HELOC is a smart way to go when financing your home renovation needs:

  • Attractive interest rates. It might seem easy to use a credit card to pay for a household emergency such as a new hot water heater or even a new floor in the kitchen. But here’s the downside to that equation: higher interest rates. Many credit cards carry rates well above 12% or 14%. The interest rates on HELOCs, according to Bankrate.com, range anywhere from 3% to 5%, making them a much more attractive and economical financing tool than any high-rate credit card. 
  • Interest is tax deductible. With a HELOC, you only are charged interest on the amount of money used. So for instance, if you have a $100,000 HELOC, and use only $60,000 to renovate your kitchen, you will be charged interest only on the $60,000, not the entire $100,000. Here’s more good news: the interest you repay on that $60,000, just like with a primary mortgage, is completely tax deductible. 
  • Easy to use. Once you’ve been approved for a HELOC, you can easily access the money by writing a check against the account or by using a debit card. It’s that simple. However, one of the key things to keep in mind with HELOCs is how they are calculated. For instance, if your house is appraised at $200,000 and you owe $90,000 on your primary mortgage that leaves you with $110,000 of equity in your home. Since many lenders will offer a credit line of 80% of that remaining equity you would be eligible for an $88,000 HELOC, meaning you’re free to use up to, but not more than $88,000.

Whether you use a HELOC to transform a ho-hum powder room into a spa-like master bath, or simply replace worn flooring or faded wallpaper, you’re doing more than improving your surroundings. You’re also adding value to your home and ultimately increasing the equity in one of your biggest assets.

Not sure if HELOC is right for you? Fill out this form to get a free rate quote today.