February 5, 2025Unlock Your Home’s Equity: 9 Savvy Uses 

Life is full of dreams – whether it’s renovating your forever home, funding your child’s education, starting a business, or finally booking that once-in-a-lifetime vacation. But let’s be honest, turning those dreams into a reality can often feel impossible when you consider the time and effort required to save up the necessary money.  

Here’s the good news: if you’re a homeowner, you have a powerful tool at your fingertips – a Home Equity Loan. This unique financing option allows you to unlock the value in your home to fund your goals affordably. So, why put your dreams on hold when you can take a smarter route to achieve them? 

Right now, when you get a home equity loan with PEFCU, we’ll pay your closing costs*! Read on to see why a home equity loan could be the right choice for you! 

 

What is Home Equity & Why Does It Matter? 

Owning a home isn’t just about having a place to live. It’s also about unlocking opportunities, like using your home’s value to achieve your financial goals.  

Home equity is defined as the portion of your home’s value that you own. Equity is calculated by identifying the current value of your home and taking out the amount still owed on your mortgage. You can calculate your home’s equity yourself using the following formula:  

Home Equity = Home’s Current Market Value – Mortgage Loan Balance (Amount Owed) 

For example, if your home is valued at $375,000 according to current market prices, and you have $225,000 remaining on your mortgage loan, your home’s equity will be roughly $150,000. You can borrow a portion of these funds quickly and affordably through a Home Equity Loan or Home Equity Line of Credit.    

 

Home Equity Loan vs. Home Equity Line of Credit 

Tapping into your home’s equity is a significant perk of homeownership. These loans are secured, meaning they use your house as collateral. The financial benefit is that the interest rates are substantially lower than alternatives, such as a personal loan or credit card. But lower rates aren’t the only advantage – the terms are much longer, often over ten years. Longer terms provide much lower monthly payments.  

However, deciding to tap into your home’s equity isn’t the only decision to consider. How you access these funds also matters. There are two popular borrowing options: Home Equity Loans and Home Equity Lines of Credit: 

Home Equity Loan: 

With a traditional home equity loan, you will receive the funds upfront in a lump sum. The interest rates are usually fixed, meaning they will not change throughout the life of your loan. This option is popular for well-defined projects, such as a home remodel. 

Home Equity Line of Credit (HELOC): 

Lines of credit function like a credit card: you have a set limit that you can pull from whenever. Once you repay the borrowed portion, you can draw on it again – and you only pay interest on the portion you borrow. The interest rates are usually variable, meaning they can fluctuate with the economy. HELOCs are ideal if you want low-cost funds that you can quickly access as needed over an extended timeframe.  

 

Turning Your Home’s Equity into Opportunities 

When people think about “Home Equity” Loans, they often assume these tools are solely for home-related expenses, like remodels or repairs. However, your home’s equity can be used to fund just about anything. That’s why these loans are so beneficial to homeowners.  

Here are nine of the most common uses for Home Equity Loans: 

• Consolidating Debt: 

One of the most effective ways to utilize your equity is to consolidate high-interest debt, like personal loans or credit cards. Combining multiple debts into a single, more manageable payment allows you to regain control over your finances. Plus, home equity rates are often significantly lower – allowing you to save substantial money immediately.   

• Covering Education Costs: 

Whether it’s private school or college expenses, education can be an expensive endeavor. Sure, it’s a worthwhile investment in yourself or your children, but that doesn’t mean you must acquire costly debt to make it happen. Instead, use a lower-rate home equity loan as an affordable alternative. 

• Paying for Medical Bills: 

Unexpected medical expenses can arise at any time. Utilizing the value built up in your home to cover costs can provide you with peace of mind and the necessary funds to pay for bills that may not be fully covered by insurance. This strategy can be particularly helpful in managing costs for things like major surgeries, ongoing follow-up treatments, or emergency care.  

• Taking a Trip: 

That once-in-a-lifetime excursion you dream about doesn’t have to remain on your bucket list.  Whether it’s a honeymoon, anniversary milestone, or a well-deserved family vacation, home equity loans provide an affordable means to make it possible.  

• Financing a Wedding: 

Speaking of honeymoons… planning a wedding often comes with a hefty price tag that can feel overwhelming. Using your home’s equity to pay for venue rentals, catering, and other expenses can significantly ease the financial burden and allow you to plan the wedding of your dreams.  

• Creating a Financial Safety Net: 

Life can throw you a financial curveball when you least expect it. You may unexpectedly encounter urgent repairs, a job loss, or unforeseen medical expenses. By leveraging a HELOC, you can instantly create an emergency fund to handle these stressful situations without straining your wallet. Enjoy the peace of mind knowing that your home’s got you covered.  

• Starting or Investing in Your Business: 

If you have entrepreneurial aspirations, consider leveraging the equity in your home as a financial springboard of sorts. You can access the necessary capital to launch your business, invest in equipment, or cover startup and operating costs. Put your home to work for you and bring your business vision to life!  

• Buying More Property: 

Looking to expand your real estate portfolio? You can use your home’s equity to purchase additional properties, whether for vacation use or long-term rental investments. This strategy can create additional streams of income for your family and diversify your financial assets.  

• Upgrading Your Home: 

Lastly, you can use your home’s equity to transform your home. Whether it’s necessary repairs, a complete remodel, or building that backyard oasis you’ve dreamed about, a home equity loan can bring it to life. Plus, using the equity in your home to improve your living space can boost your home’s value – making your endeavors a win-win! 

 

We’re Here to Help! 

Taking advantage of your home’s equity can be a powerful tool to help you achieve your financial goals and enhance your quality of life. Whether you’re looking to consolidate debt, pay for major events and expenses, or upgrade your living space, your home’s equity has you covered. 

If you want to learn more about our home equity loans or are curious how much equity is available in your property, we’re ready to help. Please stop by any of our convenient branch locations or apply online at PEFCU.com. 

 

 

Each individual’s financial situation is unique and readers are encouraged to contact PEFCU when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.  

*Offer valid for Home Equity Loans applied for between February 1 – April 30, 2025. Borrower will be responsible for prepaid interest, taxes (including state intangible tax where required), insurance, and attorney fees where required by state law to be paid by borrower.  

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