Home equity remains a tremendous financial resource when used wisely and for right reasons. A home equity line of credit (HELOC) can be obtained using your home equity as security. Although the route to getting cash looks easy, it’s prudent to take the loan for right financial reasons.
What is HELOC?
A home equity line of credit allows homeowners to access money depending on the home’s value, their credit score, mortgage balance and payment ability. Usually, if everything is in order, you can access about 85% of your home’s value. However, HELOC amounts and interest rates depend on a number of financial factors.
Knowing that you can access loans using your home equity as collateral is just the tip of the iceberg. The elephant in the room remains: should you? It’s paramount to take loans on matters that are important and at the same time ensure you remain healthy financially.
Is a HELOC Useful?
Home equity line of credit is very useful when you need access to money. It works as cash insurance policy giving you an increased financial flexibility to get money at nominal costs of securing capital. You can draw money upon your home worth, but you’re not obligated.
What is the Right Situation to use a HELOC?
It’s recommended to borrow against your home when you can meet half the cost and intend to use the money for adding value to your home or life. Find home improvements that add value to your home.
Some of the right situations to consider a HELOC include:
1. Home Improvements
As previously mentioned, using funds from a home equity line of credit to complete home improvements to add value to your home is most likely a good use of a HELOC.
2. Consolidating Debts
The decision to consolidate your debt and secure a loan against your home must be weighed heavily. Converting a consumer debt into a guaranteed loan and managing overspending habit requires discipline and focus. However, you will be able to pay remaining debts at a lower interest rate.
3. Emergency Bills
A home equity line of credit remains an option to pay emergency bills once all other means have been exhausted. It’s ideal when supplementing inadequate funds.
4. College Costs
For parents who need funds to pay for education, a HELOC can help with college costs. However, before making that decision, ascertain your financial situation, other options and ability to pay.
A home equity line of credit can help many homeowners when used for the right reasons. If you think a HELOC may be right for you, contact us today to learn more and get the process started!