How to use your home equity this summer
If you're a homeowner, your home can be a helpful source of funding for any number of purposes. That's thanks to something called home equity, or the value you've built in your home. You can tap into this equity using products like home equity loans and home equity lines of credit (HELOCs), often at rates considerably lower than other funding sources.
While your home equity can help you at any time of year, the summer brings new opportunities to draw from this valuable resource.
Find out how much you can borrow from your home equity here.
How to use your home equity this summer
Summer can be a great time to tap into your home equity. Here are three ways you can use it.
Make home repairs or renovations
The warmer months are ideal for making home improvements you might have been putting off, from fixing an old roof to adding some curb appeal. Home repairs and renovations are often the best use for a home equity loan or HELOC because they may qualify for a tax deduction.
"Interest on home equity loans and lines of credit are deductible only if the borrowed funds are used to buy, build, or substantially improve the taxpayer's home that secures the loan," the IRS states. "The loan must be secured by the taxpayer's main home or second home (qualified residence), and meet other requirements."
To check if your home improvement plans qualify for this deduction, consult a tax professional in person or through a tax filing site.
Explore current home equity rates online now.
Fund a vacation
If your summer plans include travel, you can use your home equity to cover the costs. It's often much more affordable than other financing options, such as credit cards and personal loans.
Currently, credit card interest rates average around 20%, and personal loan rates range from 8% to 36%. By contrast, home equity loan rates are about 7% and HELOC rates are about 7.8% to 8%. That can save you a considerable amount of interest over the course of paying back your borrowed amount.
Buy a vacation home
If you regularly travel to a certain spot and are tired of staying in hotels and short-term rentals, you might be considering purchasing a vacation home. If so, tapping into the equity in your current home can help.
Using home equity funds to pay for a vacation home can allow you to put down a larger down payment, lowering your interest rate on the new home's mortgage. You could even earn passive income by renting out your vacation home when you're not using it, helping you get the most from the money you borrow and building wealth for the future.
The bottom line
If you've been contemplating taking a vacation or doing some extra projects around the house this summer, drawing from your home equity can help you make these plans a reality. You can start by calculating your home equity, making sure you meet borrowing requirements, and comparing home equity options here.
