How to Use Your Home Equity in Smart Ways


Your home’s equity is the value of your home minus any balance you have remaining on your mortgage. There are plenty of ways you can put your home’s equity to work. An HELOC allows you to put your funds to work in smart ways.

Helping Your Children

You can use your home’s equity to help your children, including giving them a start in life. If they are thinking about going to college, you could get an HELOC to cover some or all the cost of their education. This can prevent your child from having to take out as much debt, so it is easier for them to be independent after graduation.

Consolidating Debt

You can use your house’s equity to consolidate all types of debt, whether it’s credit card debt, an auto loan, or a personal loan. It’s smart to consolidate the debt with the highest interest rates to make it worth your while. You can use the funds to save money because an HELOC often gives you lower interest rates than your other debt.

Improvements to Add Value to Your Home

Many times when planning a home renovation, HELOCs can be a great way to pay for upgrades or improvements that can increase your home’s value. Some of the most popular value boosting improvements include kitchen upgrades and garage door replacements. Still, any type of improvement can be worth it if you enjoy it yourself. Putting in a pool often leads to a very low return on your investment, but if you love swimming and see yourself using it all the time, it could still be worth putting one on.

You can also add on to your home with the help of your existing equity. This can help you add more usable square footage, and if you give yourself more room, you may be less likely to need to move, which can also save you money. If you already like your home and just feel it is a little on the small side, adding more space, like a bedroom, family room, mudroom, or multi-purpose room could help you get just enough space to stay there for a few more years. You could also use the funds to finish an unfinished basement so you could use it for your adult children or better storage space.

Money for an Investment

If you want to start a business or purchase an investment property, it will cost you quite a bit of money. Investment properties require you to come up with a down payment at a minimum. Starting a business can be expensive as well because you may need to build it up from scratch or open a franchise. Both these options come with startup costs. A home equity loan can be less expensive than getting a mortgage because your property secures the amount. The same is true of using this option to start a business because a small business loan can be difficult to quality for and come with high interest rates which make it difficult to pay back.

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