HELOC: Use Your Home’s Value to Improve It

With spring around the corner, many homeowners start thinking about the improvements they’ve been putting off all winter. If your to-do list is long, but your cashflow is short, you might want to consider a home equity line of credit, also known as a HELOC.

These loans give you access to the value you’ve worked so hard to build and they provide the flexibility you need to make your projects a reality.

Many people don’t take advantage of their equity until it’s time to sell. With a HELOC, you can borrow up to 100% of your home’s value, minus your mortgage balance, right now. You can then use those funds to make unexpected repairs, complete residential enhancements to increase the resale value or accomplish pretty much anything you see fit.

One of the nice things about a HELOC is that it’s open-ended, meaning you can draw out money up to the approved limit and pay it back as needed — similar to a credit card, but with much better rates and terms. So, for example, if you’re remodeling your bathroom and you discover that your water heater needs to be replaced, your line of credit could cover that expense as well, without any additional applications or processing.

America First offers an interest-only HELOC, which gives you the lowest possible monthly payments for the first five years. During that time, called the draw period, you’ll only pay the loan’s interest back. When the draw period ends, the loan balance converts to a 10-year repayment plan. At that time, you can start paying down the principal or refinance your interest-only HELOC and start another five-year draw period.

However, please keep in mind that any interest-only HELOC principal balance still needs to be paid at some point. And defaulting on any home equity loan could result in foreclosure. You should practice responsible borrowing and only tap what you can reasonably pay back during the loan’s term. Using a HELOC in this way will help keep you out of financial trouble and give you short-term cashflow for home repairs and improvements.