There’s a saying, “Home is where the heart is,” but many people may not realize it’s also where an extra line of credit can be found.

For most people, purchasing a home is the most expensive investment they’ll make, but the equity that builds up in your home can also be used to help pay for significant expenses through a Home Equity Line of Credit (HELOC). In simplified terms, a HELOC works similarly to a credit card in that you can use the amount you need, you don’t have to use it immediately, and you only pay it back after you use it.

Example: If someone owns a home worth $250,000 and owes $150,000 on their first mortgage, then $100,000 is the estimated amount of equity. However, the exact amount of equity they can borrow depends on the loan program.

There are a few different reasons someone may want to use a HELOC; some common causes include home renovations, creating a line of credit for emergency use, and funding for college.

1. Home renovations

Using a HELOC is a great way to complete updates or renovations, as you may be able to find a lower interest rate with a HELOC versus taking out a home loan for remodeling. Making home improvements can help increase your house’s equity; if you use a HELOC for this purpose, you’ll be using the value of your home to increase its overall value in the future.Using a HELOC is a great way to complete updates or renovations, as you may be able to find a lower interest rate with a HELOC versus taking out a home loan for remodeling. Making home improvements can help increase your house’s equity; if you use a HELOC for this purpose, you’ll be using the value of your home to increase its overall value in the future.

2. Funding in case of an emergency

Life can come at you quickly. Even with an emergency savings account tucked away, you may still want the peace of mind of knowing you can call on an accessible line of credit. Remember, when you take out a HELOC, you don’t need to use it right away. You can instead use it to cover emergency costs like car repairs, medical bills, or any other unpleasant surprises that may pop up down the road.

3. College expenses

College for you or your family can come at a considerable financial cost. Using your home’s equity can help fill in the gaps after you’ve used your college savings accounts or scholarships toward tuition. However, make sure you’ve done due diligence in researching other funding options like student loans first—borrowing significantly against your home when it isn’t directly increasing its equity (like making renovations) needs to be carefully considered.

As with any other financial decision, be sure to research your options and make a choice that best suits your needs. If you want to learn more about HELOCs, visit our FAQ blog on the topic, or contact one of our experienced local loan originators to help guide you through your options.