Author: Tim Shortreed, VP/Loan Officer, PremierBank

A Home Equity Line of Credit (HELOC) can be a powerful financial tool for homeowners looking to tap into their property’s value. By allowing you to borrow against the equity you have built in your home, a HELOC can offer flexibility and access to funds when you need them most. Here are some of the top benefits of a HELOC;

1. Flexible Borrowing and repayment. Unlike a traditional mortgage loan, which provides a lump sum upfront, a HELOC functions more like a credit card.  You are given a credit limit based on the equity in your home, which gives you the flexibility to use as much or as little as you need within that limit–when you need it. This makes it ideal for ongoing expenses like home improvements or for managing unforeseen financial challenges.
2. Lower Interest Rates. HELOCs typically come with lower interest rates compared to unsecured loans or credit cards because they are secured by your home, allowing you to access funds at a more affordable rate.
3. Tax Deductible Interest. In some cases, the interest paid on a HELOC may be tax deductible if the loan is used for home improvements. The IRS may allow homeowners to deduct interest on a HELOC if the funds are used to buy, build, or substantially improve the property securing the loan.  However, it is critical to check the latest tax guidelines or consult with a tax professional to understand the specifics.
4. Access to large sums of money. Homeowners with significant equity in their property may be able to access to a substantial amount of money through a HELOC, which can be used for major improvements, debt consolidation, or other expenses. However, the exact borrowing limit will depend on factors like your home’s value, equity, and your financial position, and credit.
5. Improves Cash Flow. Because HELOCs often come with interest-only repayment options for a portion of the loan term, you may have the flexibility to manage cash flow more effectively. With these options, you could make smaller payments at the beginning, giving you time to improve your financial situation before tackling the larger principal payments. Depending on the structure of your HELOC, there is a potential for payments to increase following your interest-only period.
6. Only pay for what you use. One of the most significant advantages of a HELOC is that you only pay interest on the amount you draw, not the total available amount. For homeowners who only need access to small sums of money occasionally, this can result in considerable savings on interest.
7. Fast access to funds. Once your HELOC is approved, you can access your funds quickly, often through checks or even online transfers. This immediate access can be a lifesaver in emergency situations or for planned expenses, such as home improvements or medical bills.

A Home Equity Line of Credit (HELOC) can be a versatile and cost-effective way to access funds for a variety of purposes; with lower interest rates, potential tax advantages, and flexible repayment options. However, the interest rate is often variable, and not all uses may qualify for tax advantages. It’s important to consider the costs, risks, and manage your HELOC responsibly to avoid jeopardizing your home’s equity or your financial stability.  Always consult with your PremierBank financial advisor or lender to determine if a HELOC is the right choice for you.

If you’d like to learn more about a Home Equity Line of Credit (HELOC), click here.