during the periodAnd , many adults look for any edge they can get to make ends meet. This could mean reducing debt, refinancing items like student loans or reducing their insurance coverage. For homeowners, this can mean leaning on their biggest financial investment: their home.
A house does not only provide a roof and four walls. It can also be used as an additional source of income if needed. A, for example, might be worth pursuing for those looking for quick cash. Older homeowners can benefit from one . Others a .
HELOCs will allow owners to cash out a portion of the equity they have built up in their home. This type of credit works like a credit card because owners will borrow money when needed and they can pay it back as other types of credit.
As with all financial products, timing around a HELOC is crucial to making it worthwhile. There are three times when it generally makes sense to act, which we’ll detail below.
If you think you might benefit from a HELOC, start exploring your options here or use the table below to check your eligibility.
Best time to get a HELOC
Here are the three best times to get one.
When you have to pay off high-interest loans
If you’re currently saddled with high-interest debt with no end in sight, consider paying it off – or paying it off in full with a HELOC. According to recent data, interest rates on credit cards are currently around 20%. Federal Reserve. Compare that to a HELOC with an annual percentage rate (APR) of 7% to 11% (depending on your credit history and other factors) and you’ll quickly see why this type of credit is good to use.
Not sure what interest rate you qualify for? Explore your HELOC options here now and find or check your local options using the table below.
When you need to make major household repairs
You can avoid a HELOC if you need to make a household repair and can pay for it with a tax refund or a reasonable withdrawal from your savings account. But if you need to make significant repairs or renovations that will cost thousands (if not tens of thousands of dollars) then a HELOC is worth pursuing. Unlike other popular forms of credit, if you use a HELOC to fix your home you may be eligible to deduct the interest you pay during tax season.
“Home equity loan interest and lines of credit are deductible only when the borrowed funds are used to purchase, construct, or substantially improve the taxpayer’s home that secures the loan.” The IRS Explains “the loan must be secured by the taxpayer’s principal home or second home (qualified residence) and meet other requirements.”
When you have significant equity in your home
The more equity you have in your home, the more HELOCs you’ll qualify for. So if you can wait and put more money toward your mortgage, you’ll put yourself in a better position than many lenders prefer if you work as soon as you reach the 15% to 20% threshold. The more money you put into your home you can potentially withdraw at a lower interest rate. If you withdraw early, you’ll have more freedom to use the money for different items versus a lower amount limit.
A HELOC can be an affordable and smart alternative to traditional forms of credit. Instead of going the personal loan or credit card route, go back to the home you’ve already invested your hard-earned money in. Don’t forget to do it on time.
So, if you have high-interest debt you want to pay off, consider taking out a HELOC. And if you need major home renovations, a HELOC can help pay for them (and it can be tax deductible). Finally, if you can afford it, wait until you have significant equity in your home before accessing it. This will give you more money to use for a wider series of items and projects.
Ready to start? You can now easily explore your local HELOC options