Nov 05, 2021 / Home Equity

5 Creative Ways to Use a HELOC

When you hear the words “home equity line of credit” (HELOC), you might think of updating your existing home, adding more space, improving your curb appeal, or some other home-related renovation project. After all, adding value to your home is perhaps the most prudent use for a HELOC. But there’s more to a HELOC than meets the typical homeowner’s eye. A HELOC can be helpful for just about any expense, including the following 5 creative uses.

1. Make a Down Payment on a Second Home

The Utah housing market is crazy competitive. Anything you can do to make your offer look better than the other dozen offers on the table is worth a serious look—and that usually means making a large down payment, a cash offer, or some combination of both. But if you need the equity from your existing home to buy a new home, what are you going to do when you’re in between houses? By making a down payment with a HELOC, you can be more competitive with your purchase offer, while also staying in your existing home until you’re ready to move in to your new one.

2. Build a New Home

If you’re sick and tired of the Utah housing market altogether, and you’ve finally decided to just start building on your own, a HELOC can be a great option. If you’ve found a plot of land, you can use the HELOC to make a down payment on the purchase. Or, you can get moving on construction with a great interest rate loan that allows you to make draws to your line of credit on an as-needed basis. That gives you the flexibility and convenience to move forward with construction at your own pace. If you’re thinking of building, a HELOC is an affordable alternative to a construction loan, especially if you’re just starting out.

3. Start a Business

You know you have a great idea, your small group of clients/customers know you have a great idea, but your bank account still isn’t on board with you starting up your own business. Not to worry. A HELOC can help you find the funds to get your business off the ground. Just like with building your own home, a HELOC gives you the advantage of only using what you need, so you don’t have to stretch yourself financially past the point that you’re comfortable. Plus, HELOCs traditionally have much better interest rates than other types of loans that might help you start a business. And, they’re usually much easier to qualify and apply for than other business funding.

4. Pay Off Your Credit Card Debt

There are lots of options for paying off credit card debt, including personal loans and balance transfer loans, but a HELOC may give you the benefit of a much lower interest rate. That way, you can save money and/or take your time to pay off your debt. You should, of course, weigh the risk of turning non-secured debt (credit card debt) into secured debt (a HELOC that uses your home as collateral). But as long as you plan to pay off the debt anyway, you might as well save money while you’re at it. In many cases, paying off credit card debt with a HELOC means significant savings for the borrower.

5. Pay for a Big Expense

HELOCs are tailor-made to pay for big purchases, so what’s so creative about paying for a major expense? Many people either don’t know they can, or don’t think to use their HELOC for things like taxes (tax season is right around the corner, again), emergencies, tuition, the holidays, and the list goes on. If you have a big expense, a HELOC gives you the flexibility to affordably borrow money at your own pace to pay for just about anything. Don’t overlook the helpfulness of a HELOC when you’re in a pinch for fast cash or need to make a major purchase.

The next time you think HELOC, don’t narrow your focus. Think outside the home improvement box and consider using funds to buy a second home, build a new home, start a business, pay off debt, and/or other big expenses. To learn how a HELOC can help you, come visit a Utah First branch or give us a call to chat with one of our helpful HELOC specialists.