Your home is probably the most expensive item you’ll ever buy. But it’s more than just a place for barbecues in the summer, shelter from the elements, or where you snuggle together and stream your favourite shows.
Your home is also an investment. It’s not just about the return on value if you sell it. The property itself is a financial tool you can use for your benefit.
The equity that grows in your home can be yours to tap into, so you’re ready for anything. You can usually apply for a home equity line of credit (HELOC) for up to 65% of the current value of your home.
Once you open a HELOC, it works like a traditional line of credit. You can use what you need when you need it. You don’t have to use it immediately and only pay it back when you do.
With a HELOC, you have 24/7 access to the funds, lower interest rates, and have flexibility in payment options (including no prepayment penalties). You also only pay interest based on the funds that you use, not the entire amount.
Five Ways to Use a Home Equity Line of Credit Wisely.
Put it back into your home.
The most common uses for a home equity line of credit are the various ways you can put it back into your home through home improvement or renovations. This can be especially helpful if you are preparing to sell.
You can also use it to make your house more enjoyable to live in. A home loan for remodeling may get you there, but a HELOC can do the same at a lower interest rate with flexible payment options.
Building equity in a home is good because you’re using its value to increase its overall value by, for example, updating the kitchen with newer features or increasing the overall square footage of a home by adding a second floor. Another way to use the money would be to pay for minor updates (landscaping, solar panels, paint job). These upgrades may make your home sell faster or allow you to have a higher asking price.
You can use the equity from your primary residence or second home to help purchase an investment property.
Consolidate debt.
Paying off or consolidating your debts using a HELOC is not the most fun way to use it – but it is efficient. If you want to pay off your high-interest debts, a HELOC will lower your interest rate and allow you to pay just one bill rather than multiple.
For example, if you have a high-interest credit card, medical loan, and a car repair bill to pay – consider using a HELOC to take advantage of the lower interest rate AND streamline those payments. This will also help free up your financial flexibility and can even help improve your credit score over time.
Be sure to consider your options and talk to our experts to make sure you’re making the right decision, given your needs and situation.
Approaching or living in retirement
Whether you’re approaching or already living in retirement, there are a few ways you can use your HELOC to improve your quality of life. For example, a HELOC could be a good option if you need access to some cash flow. You could also use a home equity line of credit for a down payment on a rental property to generate additional retirement income.
Suppose your physical needs change, but you don’t want to leave home. In that case, you can use a HELOC to help pay for accessibility renovations, like a first-floor primary suite or accessibility ramps.
Whatever comes up.
Once you take out a home equity line of credit, you don’t need to use it right away. When financial difficulties come out of nowhere, like the need to take time off work to care for a family member, you’ll be ready to easily cover those costs.
A HELOC can also provide peace of mind by knowing you have access to money you can use in an emergency. For example, you can use the HELOC to pay for a new roof after a storm or a new car when your transmission dies unexpectedly rather than using your savings or retirement fund.
Suppose you have the opportunity to get in on a great business idea. In that case, you can use a home equity line of credit to finance a new business venture. Because it’s so flexible, it can act as a financial security blanket, so you’re always ready for whatever life brings.
Big ticket purchases.
Some purchases make sense to charge them to a credit card or take out a personal loan. But when the price is higher, using part of your HELOC might make more sense for the lower interest rate and flexibility.
There are many scenarios where this could be handy, such as paying for a wedding or a once-in-a-lifetime vacation. Or to invest in education for yourself or your kids. Maybe you’ve always dreamed of having a summer home for your family. You can use the money from a HELOC as a down payment on another property for your second home.
What to remember
Even if you open a home equity line of credit and never use it, you won’t have to pay anything back. If you own your home and are interested in applying for a HELOC, call us today! Our lending experts are ready to assist you in determining whether a HELOC would work best for you and your future financial plans! Contact us today through our Member Services Centre at 1-866-554-3456 or through our Contact page.
