When the temperature drops and the leaves begin to change, you know the new season has taken hold. As we approach the end of the year, it might be a good time to refresh your space – and your finances! If you're a homeowner, the equity you have in your home can be a powerful tool to help you achieve your goals this autumn.

What is home equity?

When you begin with the current market value of your home and subtract what you owe on your mortgage, the difference is your home equity. This value comes from paying down the principal balance of your mortgage and also considers the increase in market value since you took out your loan.

HELOC vs. Home Equity Loan: What’s the Difference?

There are two popular ways to access your home equity:

Home Equity Line of Credit (HELOC):

A revolving credit line with a variable interest rate. HELOCs can help cover ongoing or unpredictable expenses, such as tuition payments or emergency repairs.

Home Equity Loan:

A fixed-rate loan that provides a lump sum upfront. This is ideal for expenses like major home improvements or debt consolidation.

These lines and loans typically feature low interest rates and offer potential tax deductions. When determining the best option for you, it’s important to think about your financial goals and how you plan to use your funds. 

Whether you have a home project in the works or a big-ticket expense that needs to be covered, you can rely on your home’s equity to help lighten the load. Learn more.

Use Cases for Your Equity

Contrary to popular belief, you don’t have to spend your home equity on your home. While many people use these funds for renovations, there are several practical ways to put your equity to work:

1. Seasonal Home Improvements 

Keeping your home up to date helps you maintain or even increase its value. At the start of a new season, look at what your home needs. Here are a few ways to refresh your space and make your home cozy all season long:

• Weatherproof & Energy Upgrades: Prepare your home for winter and save on heating costs by checking on your HVAC system, replacing old windows, and adding insulation to your home.
• Home Remodeling: With the holidays approaching, you’ll likely spend a little extra time in your kitchen. A remodel can enhance the functionality of your space and increase your home’s value.
• Exterior Repairs: Autumn gives us many reasons to be outdoors, and it’s the perfect time to inspect the exterior of your home. Use your funds for maintenance issues, such as a leaky or cracked roof, replacing shingles, or cleaning out gutters before winter.

2. Tuition & Educational Expenses

If the cost of education is a barrier, a HELOC is a smart way to bridge the gap. You can use your funds to help cover tuition, books, and other school-related expenses for you or your family. Since a HELOC works as a revolving credit line, you can borrow exactly what you need, repay it, and borrow again within a 10-year draw.

3. Debt Consolidation

Carrying large amounts of high-interest debt can negatively impact your credit score – and your overall finances. Your home’s equity can be a great tool to help consolidate your debt. You can use these funds to pay off high-interest credit cards or personal loans and simplify your monthly payments.

4. New Vehicle

Having reliable transportation is essential for daily life. Whether you’re shopping for a first car or upgrading your current one, using a HELOC or Home Equity Loan in lieu of an auto loan could fit your budget. Use your equity to finance a vehicle without dipping into your savings.

5. Emergency Fund 

While you can’t predict emergencies, you can always prepare for them. Set aside funds for unexpected expenses and enjoy peace of mind knowing you have a financial cushion. The ideal emergency fund should cover at least three to six months of living expenses, including housing, utilities, groceries, and other essential costs.

In summary, HELOCs and home equity loans offer flexible borrowing options, but both also come with their own risks. We understand that applying for a loan can generate questions and concerns for you. At Elements, we provide personalized support throughout the process so you can borrow with confidence!

If you’re struggling to determine which option is best for you, our experts are always here to help. Contact Elements Financial  for support in all aspects of your financial life.