If you’re a homeowner and considering making some renovations, you may have an untapped resource you could be capitalizing on – your home’s equity. Home equity represents the portion of your home that you truly own, calculated by subtracting your mortgage balance from your home’s current market value. This equity can serve as a powerful financial tool, especially when it comes to renovations. Here are 7 reasons to leverage your home equity:
1. Increase your home’s value
One of the primary reasons homeowners consider renovations is to increase the overall value of their property. Strategic renovations, such as updating a kitchen, adding a bathroom, or enhancing curb appeal with landscaping, can significantly boost your home’s market value. By using home equity to finance these improvements, you are essentially reinvesting in your asset, making it more attractive to future buyers and potentially yielding a higher return on investment when you decide to sell.
2. Access lower interest rates
Home equity loans and home equity lines of credit (HELOCs) typically offer lower interest rates than personal loans or credit cards. This is because your home serves as collateral, reducing the lender’s risk. Home equity lets you access more affordable financing options, allowing you to undertake larger or more extensive renovations without the burden of high-interest debt.
3. Tailor your home to your needs
As your lifestyle evolves, your home may need to adapt to accommodate changes such as a growing family, remote workspaces, or aging in place. Whether it’s transforming a basement into a home office, creating an in-law suite, or installing accessibility features, tapping into your equity can provide you with the funds to make your home more functional and comfortable for your unique needs.
4. Discover potential tax benefits
Interest paid on home equity loans or HELOCs may be tax-deductible if the funds are used for substantial home improvements. Consult with a tax professional to see what tax benefits you may be entitled to.
5. Avoid the costs of moving
Moving to a new home to gain additional space or modern amenities can be an expensive and stressful process. Besides the costs associated with buying a new property, moving expenses, and the emotional toll of relocating, you might also face higher property taxes or an increased mortgage. Using your home equity to renovate allows you to stay in your current home, making it a cost-effective alternative to moving.
6. Preserve your savings
Financing renovations with home equity means you can preserve your savings and emergency funds. Rather than depleting your cash reserves, you can spread the cost of your renovation over time, maintaining a financial cushion for unforeseen expenses.
7. Boost your home’s energy efficiency
Renovations focused on energy efficiency can lead to significant long-term savings on utility bills. Upgrading insulation, windows, HVAC systems, or adding solar panels can reduce energy consumption and costs. Financing these improvements through home equity can be a wise investment, enhancing your home’s sustainability and lowering your environmental footprint.
Tapping into your home equity for renovations is a strategic way to enhance the value, functionality, and comfort of your living space. With the potential for lower interest rates, tax benefits, and the ability to tailor your home to your needs, home equity can be a valuable resource.
Explore Valley’ s flexible options for HELOC and Home Equity Loans to help finance your home renovations. Find a local expert at Valley.com or call us at 888-235-4980
This article is intended for informational purposes only. You should consult your own tax, legal and financial advisors before engaging in any transaction. All loans are subject to credit approval. Additional terms and conditions apply.
