5 Major Benefits of a HELOC

You’ve likely seen advertisements for a home equity line of credit (or HELOC) and maybe even considered one for yourself. After all, if you have a decent amount of equity built up in your own home it would be nice to access these funds without going through a sale. But is a HELOC worth considering?

What Is a Home Equity Line of Credit?

A HELOC is a revolving line of credit that allows you to borrow against the equity you’ve built in your home. Your available equity is based on the difference between your home’s value and what you still owe on your mortgage.

Unlike a traditional loan, a HELOC works more like a credit card. You can draw funds as needed during a “draw period,” repay what you borrow, and then access those funds again up to your approved limit. This structure gives homeowners ongoing access to funds without having to reapply for a new loan each time.

Benefit #1: Flexible Access to Funds

One of the biggest advantages of a home equity line of credit is this flexibility of drawing against it. You’re not required to take a lump sum upfront. Instead, you borrow only what you need, when you need it.

This makes a line of credit especially useful for:

• Home improvement projects with when you’re unsure of the variable costs
• Ongoing expenses, such as tuition or medical bills
• Emergency funds you hope you'll never have to use

A HELOC can be more cost-effective than borrowing a large sum all at once since you’re only paying interest on the amount you actually borrow.

Benefit #2: Lower Interest Rates Compared to Other Credit Options

Another benefit is how home equity lines of credit typically offer lower interest rates than unsecured borrowing options like credit cards or personal loans. Lenders can offer this advantage because you’re using your home as collateral, which lowers their risk.

This can be a major benefit for homeowners carrying high-interest debt. Using a HELOC to consolidate higher-interest balances may reduce monthly payments and save money in interest over time, if it’s used responsibly.

Benefit #3: Versatile Use of Funds

Unlike some loans that restrict how the money can be used, a HELOC gives you many options for using your funds, including:

• Home remodeling or repairs
• Debt consolidation
• Education expenses
• Major life events or planned purchases
• Emergency funds

This versatility supports your ongoing and changing financial needs without taking out multiple loans.

Benefit #4: Potential Tax Advantages

Interest paid on a home equity line of credit may be tax-deductible in some cases, particularly if the funds are used to substantially improve your home. While tax rules can change and individual situations vary, this potential benefit can make them even more attractive.

Consult a tax professional to understand how a HELOC might impact your specific tax situation, but many homeowners are able to take advantage of this benefit.

Benefit #5: Keep Home Ownership and Control of Your Home

Sure, you could sell your home and access the equity, but this may not be possible in today’s challenging marketplace. Accessing home equity through a line of credit lets you tap into your home’s value without refinancing your primary mortgage or giving up ownership. This can be especially appealing if you already have a favorable mortgage rate you don’t want to lose.

If you’re curious how a home equity line of credit may benefit your financial situation, contact our Member Service Center at 800-552-6328 to learn even more.