A home equity line of credit is a revolving line of credit that uses your past mortgage payments as collateral. Essentially, it’s a credit card that uses your house as a guarantee of your paying back the borrowed amount.
HELOCs are great for many things, but there are a few uses that we routinely find are more popular than others.
Typically, HELOCs are best used on equity-building purchases. By using the money to repair and update your home, you are essentially using your home’s credit to increase its value and improve its quality. This makes your home’s value increase, which is a great idea if you’re looking to sell your home in the near future.
Similarly, to home repairs, renovations can drastically increase the value of your home, making them a popular use of a HELOC. By adding square footage or updating an outdated kitchen or bathroom, you can quickly add value to your home and see a quick return if selling soon afterwards.
Another great use for a HELOC is to pay off some of your debts. Since the interest rates on home equity lines of credit are usually much lower than those on other loans, using the money to pay off debts could help reduce your interest costs. Interest rates and amount of debts owed depend on individual circumstances, so it is best to investigate your specific interest rates beforehand.
College tuition payments can be expensive, are usually due in large lump sums, and are notorious for having high interest rates. A HELOC is a great way to borrow the money to pay tuition bills all at once, and then slowly pay off the debt over a set repayment period. Home equity lines of credit tend to be a good alternative to student loans due to their low interest rates, which will save you money in interest payments in the long run.
HELOCs are a great line of credit option if you are looking to do home repairs and renovations or consolidate debt and education expenses. Their low-interest rates make them a popular alternative to other types of loans and allow you to use your previous mortgage payments as collateral. Next time you’re in the market for a loan, think an RMLEFCU HELOC first!
Have more questions or would like to apply for a HELOC today? Visit our website or give us a call at 303-458-6660.