Home equity is the value of your home minus what you owe on it (any liens and loans, such as your mortgage balance).
There are three main ways to use your home equity for home improvements: a home equity line of credit, a home equity loan or a home equity agreement.
Home equity is a valuable asset, especially when looking to improve your home. If you’re wondering how to use home equity for home improvements, several options are available.
Some people prefer to use a home equity agreement, while others seek out a home equity line of credit or a home equity loan. While each is a valid option worth exploring, it's essential to take the time to do the necessary research to see which one allows you to best achieve your home improvement goals.
WATCH: Should I Borrow to Renovate? Home Improvement Loan or Home Equity Line of Credit?
Deciding how you want to finance your home improvement project is a big decision. You might be considering a home equity loan, a home equity line of credit or a home equity agreement. If you’re in the process of deciding which is best for you, here’s a comparison of these three options to help you make the best choice.
Home Equity Agreement (HEA)
A home equity agreement is a contract between you and a HEA service provider that allows you to get a lump sum of cash in exchange for a share of your home equity.
These agreements can be beneficial for those:
Who don't want to take on additional monthly payments or interest associated with loans
With a low credit score
With a high debt-to-income ratio
Who don't qualify for other financing options
Home Equity Line of Credit (HELOC)
A home equity line of credit is a revolving line of credit that you can draw from as you need. You pay back the money, with interest, over a set amount of time. Interest can vary over the life of the loan.
Home equity lines of credit are suitable for those who:
Need flexible access to money
May not be sure of exactly how much their home improvement will cost, or exactly when they will incur the costs
Home Equity Loan (HEL)
A home equity loan is a loan that is secured by your home. It allows you to borrow a lump sum of money that you can use to pay for your home improvement project. These loans usually come with lower interest rates than unsecured (personal) loans.
Home equity loans can be helpful for those who need a larger amount of money to work with up front. Interest rates are set through the life of the loan.
A HEA gives you the ability to use your home equity to make home improvements – without having to take on any additional debt.
Curious how you can make the most of your home's equity for home improvements? Here are some of the best improvements that can help you increase your home's overall value.
1. Kitchen remodel
Your kitchen is one of the most-used rooms in your home, but it’s also an area where you can make a significant impact on the feel and functionality of your entire home.
Whether you’re planning a minor update like new countertops or a major overhaul, a kitchen remodel can often increase the value of your home.
2. Bathroom remodel
A bathroom remodel also can increase the value of your home. Aside from kitchens, bathrooms are some of the highest-value rooms in a home. There are endless design options for bathrooms, which means there is a wide range of ways to update your space.
A small update like new faucet fixtures or tiling can impact the value of your home. At the same time, a bigger project like a complete bathroom overhaul can help you increase the home's value significantly.
3. Roof replacement
Replacing your roof is one of the best ways to protect the value of your home. Roofs are one of the most-requested repairs asked for when it comes time to sell. By maintaining your roof, or replacing when needed, you can keep the value of your home high.
4. Make energy-efficient upgrades
Insulation, energy-efficient windows, and heating and cooling systems are all excellent upgrades that can help improve your home’s energy efficiency. These upgrades decrease the amount of money you spend on utility bills, and can help improve the value of your home.
5. Improve your home’s curb appeal
Finally, improving your home’s curb appeal can also help increase the value of your home. Curb appeal is the first thing potential homebuyers notice.
Home equity is a valuable asset that can improve virtually any aspect of your home. From stylish kitchen renovations to energy-efficiency upgrades, a home equity agreement can help you pay for the improvements that matter most to you.
Ready to see what a HEA can do for you? Contact Unlock Technologies today for more information.
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