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Put Your Equity to Work: How to Make the Most of a Home Equity Line of Credit

February 10, 2023

A Home Equity Line of Credit (HELOC) can be a powerful financial tool for homeowners. It offers the potential to tap into the equity in your home and use that money for investments, repairs, or other large purchases. In this blog post, we will explore how to make the most out of your HELOC and put that equity to work. By the end of this article, you will be equipped with the necessary tools for successful HELOC management.

What is a home equity line of credit (HELOC)?

A HELOC is a type of loan that enables individuals to borrow funds against the equity in their home. Much like a credit card, these loans have lower interest rates and more flexible payment plans. Security for the loan is provided by the value of your property and can be used for various needs such as making renovations to your house, taking care of repairs, financing tuition fees, and more. 

The advantages of a HELOC

With a HELOC, you can access the equity you've built up in your home to get the funds for those large projects or for whatever unexpected expenses may come along. Unlike other loans and credit cards with high-interest rates and fees, the interest rate on a HELOC is often lower than other loan products, making it an attractive borrowing option.

How your credit health impacts getting a HELOC 

Credit health is an important factor to consider when trying to get a Home Equity Line of Credit (HELOC) because if you have not been responsible with other lines of credit, lenders become wary of lending out more money. They need to feel as though they can trust that you will be able to manage even more debt. They look at your FICO score and check if you have any late payments or delinquent accounts. Good credit health tells them that you are the kind of borrower that is reliable and that you understand what it means to make financial decisions responsibly. When your credit is good, creditors will feel secure in their decision to provide you with a HELOC so that you can fund major purchases like home renovations or investments for your business.

How you can use a HELOC

Home equity is the difference between what your home is worth and what you owe on it. If you’ve been in your home for a while, chances are that you have built up some equity over time. You can use this equity as leverage to do things like to make home improvements, consolidate debt, and invest in other financial opportunities. Let’s take a look at how you can use a home equity loan for smart financial decisions. 

Home improvement projects 

Using your home equity to finance a remodel or upgrade is usually cheaper than other forms of financing. Not only will this improve the value of your home, but it could also improve your quality of life by giving you more space or making room for new features that add convenience or luxury to your living situation. It may also be tax deductible. Furthermore, it’s easier to qualify for a loan backed by home equity than other types of loans because lenders view this type of loan as less risky (since the house itself serves as collateral). 

Debt consolidation 

If you have high-interest debt, such as credit card debt, then taking out a loan to borrow money against the equity in your home can be an effective way to reduce overall interest costs and simplify monthly payments into one single payment. This works especially well if you plan on staying in the same house for a few years since it allows you to pay off the debt over time without having to worry about fluctuating interest rates or changing terms. 

Starting an emergency fund

Having an emergency fund is a must for any homeowner. Having access to a line of credit against your home equity can help you build up enough funds to cover unexpected expenses or even just give yourself peace of mind that you have some financial security if something were to happen and you need quick access to money.

Paying for college

If you are planning to send your children to college in the near future, then having a HELOC could be an attractive option for covering tuition costs. It's also easier to qualify for this type of loan since it's secured by the equity in your home.

What you need to know about Home Equity Lines of Credit (HELOCs) 

If you’re a homeowner, you may be considering taking out a home equity line of credit (HELOC). Before taking out a HELOC, it’s important to understand how they work and what the associated costs are. Here’s an overview of what you need to know about HELOCs. 

The draw period

A HELOC will have two main periods: the draw period and the repayment period. The draw period is the amount of time during which you can access funds from your loan. During this time, instead of receiving one lump sum payment, like with other loans, you can withdraw money as needed up to your credit limit. This could be helpful if you are making large purchases or renovations over a period of time and don’t want to take out all the money at once. 

The repayment period 

During the repayment period, you will not be able to draw on any additional funds from your loan and will begin to pay the principal and also pay interest on what has been borrowed during the draw period. This is in addition to any mortgage payments you may still be making in order to pay off your mortgage loan.

Depending on your lender, the repayment period may last up to twenty years after which point all borrowed funds must be paid back in full.  

Credit limits 

The amount of credit available to you with a HELOC will depend on your home’s current value and other factors, such as the amount of equity you have in it. Generally, you can borrow up to 85 percent of your home’s value. Your lender will provide you with a maximum loan amount or credit limit, which is the maximum amount you can borrow during your draw period. The credit limit should be enough to cover any large purchases or renovations that you anticipate making. 

Interest rates

Your lender will also set an interest rate for your loan which could either be an adjustable or fixed interest rate depending on their terms and conditions. It’s important to research different lenders before settling on one as interest rates can vary greatly among different institutions. It pays to shop around for home equity loans that fit within your budget. 

Closing costs 

When setting up a HELOC, you may be charged closing costs. These can include things like application fees, appraisal fees, and origination fees. It is important to ask your lender what the approximate closing cost will be before you agree to sign any loan contracts. 


It is important to understand the features and benefits of applying for a HELOC before taking any action. With careful consideration and responsible use, a Home Equity Line of Credit can be an effective financial tool to help you make the most of your home equity. By understanding the potential risks and rewards associated with taking out a HELOC, you can make an informed decision that best meets your financial needs.