Home equity line of credit (HELOC) loans let you borrow money against the equity in your home. You can use these funds for a variety of purposes, including home improvement. Some homeowners use HELOCs to finance college or a car, while others use them for other purposes, such as debt consolidation. While these uses may be legal, you’re probably better off getting other loans for these purposes instead.
If you’re considering using your HELOC for home improvements, consider the return on investment. Your return on investment will depend on your neighborhood, geographic location, and previous condition of your home. You might want to update your kitchen, but you’re not going to see much of a return on your investment. In addition, some home improvement projects, such as remodeling the kitchen, may end up adding more debt than value.
Another benefit of a HELOC is its flexibility. If you’re planning a major home improvement project, you may want to consider taking out several HELOC loans and paying them off over time. In addition to paying off your interest and principle, you can borrow up to 85% of the equity in your home. The only difference is that you’ll have a higher interest rate than you would if you used a traditional home equity loan.
Using a HELOC for home improvements is a great option for homeowners with equity in their homes. Compared to an All-in-One mortgage or a home equity loan, a HELOC is easier to manage for ongoing expenses. In addition to paying off your existing mortgage, a HELOC can even help you cover unforeseen expenses such as home repair and renovation.