Over the years, home equity lines of credit have quickly become one of the more popular ways that homeowners leverage the value of their homes. However, when borrowing against your home it is beneficial to be more cautious around what you spend that money on – for instance, it might not be best to spend a HELOC on vacations, or new home electronics. But that leaves the question, what should homeowners use a HELOC for?
1) Home Improvements
Using a HELOC to make improvements to the backyard or inside the home can be a great way to increase the overall value of the property. Installing a pool, renovating the kitchen or bathroom, even adding a deck can be a daunting task to finance. Using a home equity line of credit can be just the thing you need to kickstart that project. Once completed, these home improvements usually add more equity to your home.
2) Emergency Funds
Financial experts say that it is a good idea to have about six months’ worth of expenses put away should an emergency arise. The equity in your home can be used as a low-interest alternative to credit cards and other high-interest loans when these unforeseen events happen. Having a HELOC already in place can give you peace of mind in an otherwise chaotic time.
3) Refinancing Debt
If you have multiple high-interest debts, getting a home equity line of credit can be a great way to consolidate at a much lower interest rate. These forms of debt are unsecured, and as such can come with rates as high as 20%! However, since a HELOC is secured against your home, the lower interest can potentially save you thousands, as well as make the number of monthly payments much more manageable.
4) Long Term Investments
Your HELOC isn’t just available to use on your home. Some homeowners choose to invest in stocks or even the real estate market. The risks associated with those investments could be high, so please do your homework! If you are looking to invest into something a little riskier with a higher return, there are many other options available to you.
5) Paying For Education
If you have a child (or several!) that are going to college or university, or even thinking about going back yourself, a HELOC could be a great way to cover tuition or any supplementary income during that time. Since the rates are relatively low, a HELOC can be a better option over a traditional school loan or credit card.
For more information contact the Mortgage Experts at Canadalend today at 1-866 iCAN LEND or better yet, Apply Online and one of our Agents will call you!