Get the Most Out of Your Home Improvement Project with a Home Equity Line of Credit

Temperatures are dropping, leaves are falling and everybody’s favorite autumn beverage—pumpkin spice—is back. As we begin to spend more time indoors, it’s a great time to think about renovations and home improvement projects to take on during the colder months.

Getting started

So, where to start? First, think about the scope of your project and what you’re trying to accomplish. Are you planning on cosmetic updates, like a fresh coat of paint and some new cozy blankets and throw pillows? Or do you want to install a gas fireplace, replace your kitchen cabinets or finish your basement?

Funding your project

If your renovation project is on the larger side, chances are you may want to leverage your home’s equity to fund it. Your home’s equity consists of the portion of your home that you own outright, whether that was paid in cash or via a mortgage. If you have paid off a significant portion of your home, you can use that equity to fund renovations—basically, using your home’s worth to increase its worth. One way to fund your project is through a home equity line of credit, or HELOC.

HELOCs are lines of credit that can have fixed or variable interest rates. You may access funds and make interest payments for a specific period of time (usually around 10 years); after that period of time ends, a repayment period begins, during which you may no longer access the funds.

Pros and cons of HELOCs

Pros:

• The freedom to use as much or as little money as you need, whenever you need it
• You are only obligated to repay the amount of credit you have used and pay interest on the amount you’ve withdrawn
• Ideal if you’re not sure how much time and money you’ll actually need to complete your renovation project

Cons:

• Interest rates may fluctuate, which means your monthly payments may increase
• You can borrow from a HELOC multiple times and don’t need to start paying back the principal right away, so it can be easy to accrue a balance
• Potential annual fees
• HELOCs factor into your credit report

Factors to consider

Before opting for a HELOC, it’s important to consider whether or not your home improvement project increases your property value and if you’ll see a return on your investment. This can be quantitative or qualitative. Quantitatively, a $25,000 kitchen remodel doesn’t necessarily mean your home’s value will increase by $25,000. However, qualitatively, a remodel may make your everyday life easier and add personal value.

It’s also important to consider your project budget, how much you can realistically afford to borrow, and how long it will take to repay it. If HGTV has taught us anything, it’s that renovations usually take longer and cost more than you anticipate.

Applying for home equity funding

The WaterStone Bank home equity line of credit has no minimum requirements on transactions, allowing you to spend what you need, when you need it. Easier access to your funds means greater financial control, coupled with flexible payment options.

Apply for a HELOC today!