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3 Reasons to Have a Home Equity Line of Credit

3 Reasons to Have a Home Equity Line of Credit

Starting with the basics, the current value of your home minus what you owe on your mortgage is called your “Home Equity”. As long as that number is positive you may have the ability to qualify for a Home Equity Line of Credit. This is a revolving loan funded by your home’s equity which is essentially a mortgage tied to a checkbook. Here are 3 Great Reasons to have a Home Equity Line of Credit:

1. Upgrading Home Improvements

We all have that wish list of improvements we’d like to make to our home. Make sure you consider improvements that increase the value of your home when choosing which home improvement projects to move forward with. Projects like a new garage door, a wood deck, kitchen facelift or a new front entry door can return more than 80%* of the value of the project. Adding value and enjoyment to your home is another great reason to use your home’s equity. Plus, the interest on your HELOC, when you make improvements to your home, may be a tax deduction. Consult your Tax Advisor for details.
 

2. Preventative Maintenance Home Repairs

How old is your roof, siding, or driveway? Remodeling a home is not only about upgrading the features; it’s also about preventative maintenance. Don’t put that needed roof repair off until you see a leak, or run your furnace until it no longer works. You can use your home equity to pay for those repairs when you want to, not when you need to; and often, at a lower cost.
 

3. Quick Access to an Emergency Fund

Taking an equity line of credit out when you don’t need it makes sure that it’ll be there when you do. We only suggest this if it is a real emergency and you’ve exhausted your non-retirement savings, and that you consider the amount that makes sense for your needs. For example, Financial Planners typically recommend an emergency fund equal to about 3 months’** worth of expenses or more. We hope the day never comes, but should you find yourself in a position of being unemployed or needing access to cash, your equity line of credit can be less expensive than racking up credit card debt.

*TheStreet.com
**Vanguard.com
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