If you have home projects and expenses that need to be funded, it may be worth leveraging your home’s equity to cover those costs. While often overlooked, home equity loans and home equity lines of credit (HELOC) are a relatively simple and cost-effective way of funding home improvement projects and life milestones, consolidating debt, and more.
Learn about the key differences between a home equity loan and a HELOC and how they can help you fund your next big financial decision.
Key differences
Before exploring what a home equity loan or HELOC can be used for, it’s helpful to understand how they differ:
Home equity loan
- One lump sum upfront
- Fixed interest rate and monthly payment
- Recommended option when your expenses are known
HELOC
- Revolving line of credit
- Variable interest rate and monthly payment
- Recommended option when your expenses are unpredictable
How can they be used?
1. Home improvement projects
A home equity loan or HELOC are attractive financing options when it’s time to make upgrades to your home and increase its value. Examples of projects you may use them for include:
- Finishing your basement
- Renovating your kitchen
- Landscaping
- Building an addition
2. Life milestones
The interest rate on home equity loans and lines of credit is commonly lower than the rate on other loan options. Tapping into your home equity can be a more cost-effective way to afford life’s most important–and expensive–moments:
- Weddings
- Higher education
- Family trips
3. Vehicles and recreational equipment
Similar to paying for big life milestones, you can use a home equity loan to pay for:
- Vehicles
- Boats
- Snowmobiles
- RV campers
4. More financial flexibility
There are several ways a home equity loan or line of credit can provide you with more financial flexibility and even strengthen your financial position. They can make it easier for you to consolidate your debt into one monthly payment, often with a lower interest rate than your existing debt. This route makes it easier to reduce your overall debt and not struggle to keep up with multiple payments.
Speak with a banker to learn more about using your home equity to fund your next big financial decision.
