What’s a HELOC?

HELOCs resemble a second mortgage and also function like a credit card. You are able to draw from this fund whenever needed. Therefore, you don’t have to withdrawal it all at once. The main difference between a HELOC and mortgage loan is that a mortgage is used to buy a home. You never see the money since it’s given to the seller and you pay monthly for a certain period of time. A HELOC is a line of credit that uses your home as collateral that you can withdrawal from at any time. The interest is only paid on the amount that you use. For example, you could get a $50,000 HELOC and only use $10,000 of it. You will only pay interest on the $10,000 that you borrowed.

Six Smart Ways to Use a HELCO

Renovate rooms

This is a great way to increase your home’s value. One of the best rooms to start with is the kitchen. Many homebuyers look for a modern kitchen that is updated with current trends. Using a HELOC to pay for this renovation is a great way to get the most bang for your buck. After your kitchen, focus on bathrooms and then bedrooms.

Convert unused space into living space

Finish your basement or convert unused space into something cozy and livable. This is a great way to add more space to your current layout and will make potential homebuyers intrigued with the amount of usable area in the home. You could also consider adding a mother-in-law suite somewhere in the layout. Adding something like this has the potential of adding quite a bit of value to your home.

Give your home a makeover

Replace siding, doors, garage, etc. for a better outdoor appearance. Having a nice outside appearance will attract buyers and will allow your home to stand out in the neighborhood. It’s amazing what a fresh coat of paint or a new roof can add to a home’s appearance!

Pay off debt

You can pay off high interest debt such as those typically associated with credit cards. Be careful if you choose to do this because you are gambling your home on it. HELOCs will offer a lower interest rate but have a high level of risk associated with them. Make sure you have a great plan in place to ensure you are able to pay off the HELOC and not default.

Pay for a vacation, college, car, etc.

Along with home improvements and debt consolidation, a HELOC can be used to pay for “fun”. Although this is a very tempting option, make sure you have a solid plan on paying back the loan. REMEMBER… your collateral is your house. If something were to happen and you weren’t able to pay the loan back, you will lose your home!

HELOCs are great tools to use when used correctly. Whether it’s fixing up your home, consolidating debt, or having a little fun; BrightStar CU can get you set up with a low-rate HELOC!