HELOC

Dream Big, Plan Smart

Using a HELOC to Turn Your House into Your Dream Home

What does “living the good life” mean to you? If you are a homeowner, it might mean finally getting the modern kitchen, updated bathroom or new pool you’ve been dreaming of. And you wouldn’t be alone. According to Statista, Americans spent nearly $400 billion on home improvements last year.

Updating your home can be a huge boost to your family’s quality of life, as well as an investment that pays off when you sell your home later. But additions, renovations or major repairs come with hefty price tags. How do you give your home a facelift without depleting your savings?

For many homeowners, a smart solution is to unlock the equity in their home with a Home Equity Line of Credit.

What Is Home Equity?

When you’re a homeowner, your home equity is the total market value of your home minus the amount of principal you owe on your mortgage. In other words, it’s the percentage of the home that you own. Every mortgage payment increases the amount of equity you have.

Qualifying homeowners can use their home equity as collateral to secure financing from a lender, typically at a much more affordable rate than you would find on an unsecured loan or credit card. This makes it a valuable way to borrow more without paying more in interest.

What Is a HELOC?

Unlike a first mortgage or auto loan, which provides a specific amount of financing up front, a HELOC lets you borrow repeatedly, similar to a credit card. This gives you the ability to cover multiple expenses over time by borrowing what you need, when you need it, up to your approved limit.

The draw period is the amount of time during which you can borrow money. Ten years is a common draw period, and this long borrowing period gives you the flexibility to renovate your home over time, rather than all at once. Maybe you want to start by replacing your roof, then remodel your bathroom next year and do some landscaping the year after that.

During the draw period, you’ll only need to make the minimum monthly payment, though paying more than the minimum will help reduce the amount of interest that adds up and keep your HELOC balance well below your borrowing limit. Like a credit card, a HELOC is a revolving credit line that lets you borrow more if you keep paying down your existing balance.

The draw period is followed by a repayment period, often lasting 10 to 15 years. At this point, you can no longer draw funds from the line of credit and must now pay back what you borrowed, plus interest, in monthly payments. The interest may be tax-deductible if you used the money for home improvements (be sure to check with a tax advisor). Keep in mind that a HELOC typically comes with a variable interest rate, which means the rate will fluctuate over time, affecting your monthly payments.

With its low rates, low fees and higher borrowing limits, the HELOC is a popular choice for people seeking home improvement loans, but it isn’t only for home upgrades. The funds can be used for practically anything: consolidating high-interest credit cards, paying for a wedding, paying college tuition – you name it.

Thinking About a HELOC? Think USECU.

It may be hard to choose the right tile for your new bathroom or right cabinets for your kitchen, but finding the right HELOC lender is easy. Head to your trusted local credit union for friendly service and money-saving rates you won’t find at most banks.

At USE Credit Union, we help make our members’ home renovation dreams come true by offering Home Equity Lines of Credit up to $250,000 with low variable rates, low or no closing costs, and low minimum monthly payments. You can get a Quick Quote or Apply Online right now.