The New Year Is the Perfect Time to Put Your Home Equity to Work

by Kristy Como Armand  

Is this the year your kitchen finally gets the upgrade it deserves? Has your family outgrown your living space? Need a new roof, updated bathrooms or maybe you’re ready to add that long-planned pool? A new year often brings fresh goals, and if you’ve been waiting for the right time and the right funding to improve your home, you may already have the solution in place: your home equity.

According to Aaron Scott, mortgage loan officer with Lakeside Bank, a home equity line of credit (HELOC) can be a smart and flexible way to finance projects. A home equity line of credit is a revolving line of credit based on the amount of equity you have in your home. “When you purchase a home, you’re investing in something with long-term value,” Scott explains. “As you pay down your mortgage, you gain equity, the portion of your home’s value you truly own. That equity can be used to help you move forward on goals you’ve been putting off.” 

Most homeowners build equity gradually over 20 or 30 years. Equity is the difference between what your home is worth and what you still owe on your mortgage. Once you’ve built equity, you may be eligible to re-borrow a portion of it through either a home equity loan or a home equity line of credit. With a HELOC, Scott says approved funds remain available for use as needed. “Once your home equity line of credit is approved for a certain amount, you can borrow what you need, pay it back in full or partially and then access those funds again,” says Scott. “It works much like a credit card, but often at a lower interest rate.” 

Another advantage is potential tax benefits. “An added benefit of using home equity for financing is that the interest can be tax deductible,” Scott notes. “In fact, this is one of the few types of consumer interest that may still qualify for tax deductibility.” 

A home equity line of credit can be used for a wide range of needs, including home improvements, vehicle purchases, college expenses and more. Scott adds that it also serves as a valuable financial safety net. “Having a HELOC approved and available gives you peace of mind if an unexpected expense comes up.” 

The key difference between a HELOC and a traditional home equity loan is flexibility. A line of credit allows your balance to go up and down as you borrow and repay, while a home equity loan provides a lump sum with fixed monthly payments. “With a home equity loan, you’re essentially taking out a second mortgage,” Scott explains. 

Scott cautions that equity financing isn’t right for everyone. “Your home is a valuable asset, and it shouldn’t be overleveraged. It’s generally recommended to leave at least 15% to 20% of your equity untouched to protect your investment.” 

As a new year begins, Scott says the most practical use of home equity is reinvesting it back into your home. “Improvements that add value not only enhance your daily life but also strengthen your financial position for the future.” 

Lakeside is currently offering a special interest rate on a HELOC. For more information about home equity loans or lines of credit, contact the Lakeside Bank location nearest you or visit mylksb.bank.