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Getting the Most from a Home Equity Line of Credit

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Home prices across the country are continuing to rise, especially in the Northwest. If you haven’t yet cashed in on your home’s equity, now could be the right time. Sure calculating your equity and knowing your home loan options are important, but equally vital is understanding how to get the most from that money.

You have two options when tapping into your home’s equity – home equity loan and home equity line of credit.

A home equity loan is the simplest of the two. You take a loan out against your available equity and get the cash in one lump sum. Generally, the financial institution will put the money into a separate savings or checking account. With this loan, you start paying it back right away over a period of 5, 10 or 15 years. These loans generally have a fixed rate.

A home equity line of credit is also a loan against your available credit, but with one big difference: you don’t pay anything back until you actually use it. A home equity line of credit is like a credit card, but with a much larger available balance and a lower interest rate. A home equity line of credit is great for anyone who has several projects to complete but knows they will do them over a period of years. Also, a line of credit can be a nice safety net for life’s unexpected moments.

Estimate Your Equity
How much equity do you have in your home? Not sure? The first step is to calculate your home’s equity with a site such as Zillow.com. When you have your estimated value, multiply it by 85%, 90%, or even 100% to determine the maximum equity you can borrow based on your lender’s equity loan options. Subtract the outstanding balance on your current mortgage using that maximum equity amount. The difference between your maximum equity value and what you owe is the amount of equity you have available.

Put Your Equity to Good Use
If someone were to ask, “What would you do with $50,000?” you’d probably rattle off some great vacation spots or the make and model of your dream car or truck. But your equity is special.It’s funds borrowed against the value of your current home. However, if you use it correctly, you can actually build more equity.

Top home projects for added value include: adding curbside appeal, updating the kitchen, replacing flooring, remodeling the master bathroom, replacing light fixtures, painting the inside and outside of the home, and replacing outdated windows.

  • Curbside appeal: Even the smallest changes to your yard add resale value to your home. Simply add a tree to the front yard or a sprinkler system to your landscaping to ensure the lawn stays green.
  • Update the kitchen: Remodeling the kitchen is one of the best investments you can make for yourself and the value of your home. In many cases, a full remodel is not necessary. Maybe you just need to replace the appliances, paint the cabinets, or add storage systems.
  • Change the flooring: If your carpets are tired and stained, it might be time to replace them. Still have laminate flooring? Moving to tile or hardwood can boost the value of your home.
  • Bathroom remodel: Yes, remodeling your master bathroom can add resale value, but experts warn that some remodels can actually detract from resale. Talk to a licensed remodeling expert about your ideal options.
  • Light the way: Replacing all of the light fixtures (ceiling and wall) in your home can dramatically update the look and feel of any house.
  • Painting: Adding a fresh coat of paint inside and out will add resale value to any home. Just be sure to choose standard, popular colors.
  • Replacing windows: If you have single-pane windows or windows with aluminum frames, replace them – all of them. You will see the return on your investment in your heating and cooling bills. Plus, you’ll add a lot of value to your home.

Ready to Use Your Equity?
Give InRoads Credit Union a call at 503.397.2376, apply online, or stop by any branch and we’ll help you get the most from your home’s equity.