Financial Tips

Maximize Your Home’s Value: 5 Ways to Leverage a HELOC for Financial Gain

A Home Equity Line of Credit (HELOC) lets you borrow against the appraised value of your home. You’ll have access to a line of credit to withdraw cash when you need it most, and you’ll only pay interest on the amount you borrow.

Are you considering a HELOC to maximize your home equity? Did you know it can also help you improve your finances? Consider these strategies to leverage this flexible loan product and receive financial gain.

1. Consolidate high-interest debt

Making only minimum monthly payments on your consumer debt costs you more in interest. When dealing with credit cards, paying off high balances can take several months or even years.

Or you can opt to consolidate your debt with a HELOC to speed up the payoff process and save a bundle in interest. Plus, with debt consolidation, you’ll have just one monthly payment, making it easier to manage the outstanding balance.

2. Utilize as an emergency fund

Life can be unpredictable, and you may find yourself in a situation where you need cash fast. Without an emergency fund, these unexpected expenses can create additional stress. Relying on high-interest credit cards to cover these costs can lead to more debt and compound the problem.

However, a HELOC provides a cushion to give you peace of mind. So, a job loss, car repair, or medical emergency won’t be such a financial burden. Instead, you can withdraw the needed funds from your line of credit to keep your finances intact.

3. Renovate your home

Home repairs and upgrades can be costly and greatly reduce your savings if you pay for them out of pocket. But with a HELOC, you can fund the renovations and repay the amount over time. If the upgrades improve your home’s value, you could earn more when selling.

In fact, installing new flooring in your home yields an average return on investment (ROI) of 300%, according to Coldwell Banker Elite. And the ROI on kitchen and minor bathroom remodels is up to 98.5% and 102%, respectively, notes HGTV.

4. Continue your education

A career change or advancement opportunity often means you’ll likely need to continue your education. Higher education costs are steep, and covering them out of your monthly budget may not be feasible. If you’ve already explored student loans with competitive rates, and they aren’t an option, consider using a HELOC to fund your education.

The benefits of continuing your education could be significant depending on your industry. On average, employees with master’s and bachelor’s degrees earn $1,574 and $1,334 per week, respectively, according to the U.S. Bureau of Labor Statistics. This figure drops to $963 for employees with associate’s degrees and $809 for those with a high school diploma.

Note: Explore student loans with competitive rates before using a HELOC. The borrowing costs may be lower, making a student loan a better fit to fund your education.

5. Cover medical expenses

If you’re facing a major medical expense, a HELOC can provide funds to cover treatment costs. This option can help you pay the upfront deductible or any uninsured medical expenses. If you have limited savings, a HELOC can be a suitable choice to take care of your medical bills.

Note: It’s equally important that you qualify for competitive terms on a HELOC and can afford the payments. Otherwise, consider negotiating a payment arrangement with the medical provider.

Applying for a HELOC

When appropriately utilized, HELOCs can help you level up your finances. Before applying, you should understand how they work and the risks involved. Your home secures the HELOC, and missed payments could result in foreclosure. Most importantly, run the numbers before moving forward. You want to ensure the benefits outweigh the borrowing costs before taking out a HELOC.

Consult with a mortgage advisor to learn more about HELOCs or to get a quote.

All loans and lines of credit are subject to credit approval. Talk to a HomeTrust Bank Loan Officer for more information about HomeTrust’s HELOCs.

The purpose of this article is informational and does not substitute as legal or tax advice. Consult with your tax advisor or legal representative for more information.


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