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10 Creative Ways People Use Home Equity Loans & HELOCs

Many homeowners are familiar with leveraging home equity loans and home equity lines of credit (HELOCs) for renovations, repairs, or debt consolidation. However, these lending options offer far greater versatility than most people realize.

Homeowners nationwide are now tapping into their home equity to finance various creative and imaginative ideas. The possibilities extend far beyond the conventional—from funding unexpected life events to investing in personal dreams. If you’re wondering what can home equity loans be used for, keep reading to find out!

1. Home Renovations and Improvements

People frequently use home equity financing for major improvements, such as kitchen and bathroom remodels, additions, accessory dwelling units, new roofs, and energy-efficient installations. These upgrades enhance living spaces and provide all residents with a higher quality of life.

A home equity loan or HELOC for home improvements both offer lower interest rates than personal loans plus they include tax-deductible interest. These financing options make major renovation projects more affordable, provide long-term financial benefits, and can potentially increase property values.

2. Debt Consolidation

Homeowners frequently take out home equity loans to combine multiple high-interest debts, like balances on credit cards, car loans, and personal loans. This consolidates them into a single loan with a lower interest rate and more manageable payment.

Beyond saving you money, consolidating debt can also relieve headaches and stress. Having just one monthly bill makes repayment far simpler than juggling multiple creditors. A single payment also lets you budget funds more easily without getting hit with late fees.

3. Funding Education Expenses

Tapping into your home’s value offers flexible funding for education when savings or federal loans fall short. It can finance continuing education, professional degrees, or children’s higher education costs.

The low rates and tax-deductible interest provide advantages compared to private student loans or parent PLUS loans. These benefits make home equity loans and HELOCs attractive options to pay for education expenses.

Using home equity for education allows borrowers to access funds as needed instead of taking large lump-sum loans upfront. It also enables continued home ownership without liquidating assets or taking on excessive interest rates via other types of loans.

4. Investing in Real Estate

Some homeowners use their funds to purchase distinctive secondary properties like vacation homes, cabins, ranches, or even castles! While riskier than primary residences, unique second homes can create priceless memories with family and friends.

However, vacation properties and specialty real estate involve major expenses beyond the initial purchase price. Remember that you must budget for ongoing costs like taxes, maintenance, utilities, and rental management.

5. Starting or Expanding a Business

Many people wonder—what else can HELOCS be used for? Home equity gives entrepreneurs an alternative to traditional small business loans or family investments. It can fund working capital, equipment purchases, or commercial space leases and build outs. Business HELOCs provide revolving access to capital as startup needs evolve.

However, there is a potential major downside. If your business venture fails, the repayment responsibility remains regardless of revenue. As such, defaulting on payments can lead to foreclosure. The loss of your home is something you must seriously consider before taking out a HELOC.

6. Emergency Fund Creation

Home equity lines of credit can provide backup emergency funds when unexpected costs arise. Access to contingency financing provides security between jobs, during illnesses, or when you need to make emergency home repairs.

The flexibility of borrowing against your home’s value is a key benefit for an emergency fund. With HELOCs, you only withdraw necessary amounts and avoid fees for unused credit. However, you must show strict discipline because withdrawals can quickly erode equity.

7. Funding Major Life Events

You can use home equity loans and lines of credit to fund once-in-a-lifetime events and milestones. Loans can pay for extravagant weddings, family vacations, and big anniversary trips without draining regular savings. This preserves cash for other goals. Equity also provides an alternative to high-interest credit cards and personal loans for these expenses.

But borrowing this way has some risk. Before getting the loan, confirm you can repay the total amount borrowed plus all fees. Setting the repayment terms up front is wise so you can maintain financial stability after the event.

8. Medical Expenses

Home equity loans are a good option for large medical expenses like surgeries, chronic care, or procedures not covered by insurance. People often finance medical bills through high-interest options like credit cards or personal loans. That causes them to go further into a debt spiral that’s hard to recover from.

You can also finance long-term treatment for chronic illnesses. Insurance companies often refuse to cover stays in rehabilitation facilities for conditions like eating disorders or addiction. A home loan provides an affordable way to pay for these critical health programs without accumulating high-interest debt.

9. Retirement Funding

Some retirees use home equity loans to supplement limited retirement income. This additional funding covers daily costs and unexpected expenses. It also provides a cash reserve without needing to liquidate investments or assets.

Borrowing against their home value allows retirees to access funds while retaining property ownership. This provides financial flexibility versus options like reverse mortgages. However, retirees should analyze income and risks first.

10. Supporting Aging Parents

Home equity loans allow families to pay expenses that arise as their parents age. In-home caregivers, house modifications, and medical bills can cost thousands. Families may want to assist parents financially but not dip into their own savings.

Loans secured against a home’s value can also fund renovations to help parents age in place. Installations like wheelchair ramps and grab bars increase accessibility and safety. An attached or detached suite provides housing for a full-time caregiver.

How Will You Put Your Home Equity to Work?

The versatility of home equity loans and lines of credit can help you achieve countless financial, professional, and personal goals. At NextMark Credit Union, we provide our members with competitive rates, flexible terms, and customized lending solutions.

Click below to see how we can help make your home equity work for you.


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