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Home Equity: A Powerful Tool

April 01, 2019

Managing Your Money

Articles

Spring is finally here and that means it’s time to tackle the home improvement to-do list you’ve been building all winter. Whether it’s a major home remodel project, creating a new outdoor entertaining space, or simply giving your bathroom a facelift, you’ve got a powerful tool at your fingertips – your home’s equity.

What is Home Equity?

Home equity is the amount of your home that you “own,” thanks to your down payment and monthly mortgage payments. Your equity increases over time as your property value increases or as you continue to pay down the balance on your mortgage loan.

For example, let’s say you purchased a home for $250,000. At the time of purchase, you put $50,000 towards the down payment and have since paid an additional $10,000 in principal off your mortgage loan. This means that you have $60,000 of equity in your home.

Utilizing the Power of a Home Equity Line of Credit

Building equity in your home is important for a variety of reasons, one being you can borrow against it. Homeowners use the equity in their home for a number of things – educational expenses, debt consolidation, vacations, and home improvements to name a few. One of the ways to do this is through a Home Equity Line of Credit (HELOC).

A HELOC is similar to a credit card (but very likely with a lower interest rate). It’s a line of credit that allows you to use the funds as you need them. It is useful for situations where you will need funds over a longer period of time and not a large lump-sum up front.

Benefits of a HELOC

  • Access to funds when you need it
  • You only pay interest on the amount you use
  • Lower interest than other lines of credit
  • Flexibility over longer period of time

A HELOC allows you the freedom and flexibility to tackle one or multiple projects over a longer period of time without having to reapply for funds.

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*Offer subject to credit approval. Promotional APR of 5.99% (daily periodic .0164110%) effective for a 60-month period from the date account opened. Upon expiration of the 60-month period, rate will be variable equal to the Wall Street Journal published Prime Rate (“index”) then in effect plus a margin. The index as of 04/01/2019 is 5.50%. Current margins range from .50% to 4.00% resulting in corresponding variable APRs up to 9.50% based on the current index. The variable rate may change monthly and is subject to a minimum APR of 5.00% and a maximum APR of 16.00%. Fees to open the plan range from $215 to $790 and there is a $49 annual fee. You must also carry insurance on the property that secures this plan. Consult your tax advisor on deductibility of your interest. For applications received by 5/31/2019. Not valid on loans in process. Member FDIC

This blog article is for informational purposes only, and is not an advertisement for a product or service. The accuracy and completeness is not guaranteed and does not constitute legal or tax advice. Please consult with your own tax, legal, and financial advisors.