Ask the Lender

What are Some of the Best Uses for a Home Equity Line of Credit?

Lauren Beasley NMLS#2438324

Whether you have an unexpected, large expense or just don’t want to dip into your savings to cover the cost of something, the equity in your home can supply the cash you need. Many people may turn to credit cards, but often a home equity line of credit’s rate (HELOC) is much less than a credit card, and it might even save you a little money on your taxes*.

So, what are some of the best uses for a Home Equity Line of Credit? According to cbsnews.com, the top 3 reasons people use a HELOC are for home repairs and improvements, as a back-up emergency fund, or to pay for a child’s college education.

Home Improvement: The beauty of using it for home improvements is that you’re actually increasing the value of your home with the money you’ve invested in it. “If these improvements are considered eligible by the IRS, you can deduct the interest you paid when you file your tax return.”

Emergency Fund: Not everyone has an emergency savings fund in place so unexpected large expenses can really wreak havoc on your budget. By opening a HELOC, you have that amount sitting there “just in case” and you have the flexibility of paying it back in installments.

College Education: Many parents utilize a HELOC for college education costs in place of taking out a parent student loan. The interest rate may be comparable and they have immediate access to the funds as needed when tuition is due.

In order to qualify for a HELOC, the borrower must have at least 20% equity in their home with an acceptable credit score and debt to income ratio. They’re able to borrow up to 80% of the appraised value, minus what is owed on their mortgage. If you’re considering a HELOC, the process is fairly simple:

• Contact your local lender to complete the application
• Submit requested documents (typically two years’ W2s, two months of bank statements and one full month of pay stubs)
• Your lender will process the application and send it to a CNB underwriter
• Once the loan is reviewed, title work and an appraisal are ordered
• Once those items are back, the loan goes through final underwriting and is approved
• Loan closing is generally within 30 days of application at CNB

For questions or to apply for a Home Equity Line of Credit, reach out to your local CNB office and speak with a retail lender.

_{*Consult a tax advisor regarding the deductibility of interest.}