HELOC: Should I have one and how can I use it?

Range
July 26, 2024

HELOC: Should I have one and how can I use it?

One underemployed financial tool available to most of our Members is HELOC. A Home Equity Line Of Credit. In a HELOC, your lender would agree to lend a maximum amount within a time period, with your home as collateral. After the draw period, there's a repayment period of 10-20 years, during which no further draws can be made, and the borrowed amount must be paid back. To set up a HELOC, it’s generally suggested that you have significant equity in your home (15-20%).

The benefits of having a HELOC in place are flexibility, potential tax benefits (Interest might be tax-deductible if used for home improvements), lower interest rates, and increased home value (if HELOC is used for strategic home improvements). Common uses of HELOC funds include:

  • Home Improvements
  • Debt Consolidation
  • Education Expenses
  • Emergency Funds

But uses of HELOC funds are not limited to those common situations. For more risk tolerant investors, you could use those funds to finance additional investments, whether it’s in the stock market or in alternative investments. Keep in mind, this is RISKY, because your house is collateral for the funds you are using.

If you’re considering a HELOC, or have questions about how you’re thinking of using that capital, please reach out to Range to discuss.

Resources:

HELOC vs Home Equity Loan (Investopedia)

HELOC Rates (Bankrate.com)

What you should know about HELOC (ConsumerFinance.gov)

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