3 smart ways to use home equity or a HELOC


If you have an aging A/C unit, that might be one of them.

If you’re a homeowner in need of credit, borrowing against your home’s equity can be a lifesaver. A home equity loan and a home equity line of credit (HELOC) are both designed to give you affordable access to credit by tapping into your home equity. The possibilities for how to use your home’s equity, however, can extend beyond the home. 

Home equity {hohm ek-wi-tee] noun; The difference between the value of your home and the amount you owe on your mortgage. You home's value: $220,000; Your mortgage balance: $120,000; Your home equity: $100,000.

What’s the difference between a home equity loan and a HELOC?

  • Home equity loan: A one-time loan based on the amount of equity you have in your home with set monthly payments and a specific payoff date.
  • Home equity line of credit (HELOC): A revolving line of credit, based on the amount of equity you have in your home, that functions more like a credit card. 

Homeowners often use one-time home equity loans to finance planned expenses such as major repairs or renovations. Similar to a personal loan, you borrow a lump sum with a fixed interest rate, fixed monthly payments, and a scheduled pay-off date.

On the other hand, because a HELOC is a line of credit, as a borrower you can generally decide how much of that credit to use and when to use it. Like a credit card, your available credit will replenish up to the original credit limit as you repay what you’ve borrowed. While HELOCs offer you more flexibility, you must also be careful not to misuse the line of credit, just like with a credit card. Manage a HELOC responsibly, as you would any other revolving line of credit, to ensure it serves you in a way that improves your financial confidence and well-being.

For a big expense, a home equity loan or line of credit may offer a lower interest rate than credit cards or personal loans, though interest rates and terms will vary based on your unique situation and credit history. Keeping your credit score above 720 can help you get favorable terms, which should effectively lower the cost of borrowing. If your credit score isn’t quite there, making consistent on-time mortgage payments is just one way to raise it.

What are good ways to use a home equity loan or line of credit?

Here are a few common reasons homeowners get a home equity loan or line of credit:

  1. Necessary or unexpected home repairs, like replacing an air conditioner, the furnace, or an aging roof
  2. Home renovations that will increase your home’s value, like kitchen, bathroom, or energy efficiency upgrades
  3. Paying off or consolidating higher-interest loans—such as credit card balances

Remember that when you take out a home equity loan or line of credit, it means you’re using the value of your home as borrowing leverage—which makes it even more important to be confident you’ll be able to repay any funds you borrow. Be sure to budget for your monthly payments and have a payoff plan in place before you borrow, especially if you’re already spending more than 30% of your take-home pay on housing costs. 

How do you get a home equity loan or line of credit?

Like many other requests for credit, applying for a home equity loan or line of credit may require that you provide bank account statements, proof of income, tax statements, and approval to check your credit history and credit score. A home appraisal is also required.

If you’re interested to learn more about whether a home equity loan or line of credit is right for your borrowing needs, visit Truist.com/HELOC

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.