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Renovation5 min

What’s a HELOC and How Can it Finance Your Next Remodel?

U.S. homeowners have a record amount of available equity at their fingertips—more than 6 $ trillion to be exact—which is the highest volume ever recorded.

Home Equity Lines of Credit (HELOCs) can be used to cover a wide variety of expenses, like undertaking a much-needed remodeling project, paying off debt or even finally going on your dream vacation. 

True to its name, a HELOC is a line of credit that works a lot like a credit card. Lenders put a ceiling on how much you can borrow, and then they only charge interest on the amount you use. It's a "use it or lose it" scenario: homeowners either have to spend the allowable funds in the HELOC or they lose it completely.

But that doesn’t mean that people are using their homes as a piggyback. There are about 800 000 homeowners nationwide who will hit their HELOC end-of-draw this year.

What’s the Catch?

So, why aren't homeowners tapping into this equity? HELOCs have one big drawback: variable interest rates. Some homeowners got burned in the housing crisis of 2008 when interest rates on their home loans repeatedly edged upward. That's one of the main reasons why traditional cash-out mortgage refinancing currently exceeds HELOC spending, even though the cash-out option usually comes with higher interest rates.

What’s the Benefit?

Still, there are factors that are making some homeowners seriously consider tapping into their home equity—specifically surrounding financing remodeling projects.

When the federal tax reform law was enacted two years ago, it initially didn’t allow deductions for HELOC interest payments. But organizations like National Association of Home Builders pushed back, and interest deductions for HELOCs have been restored “to buy, build or substantially improve the taxpayer’s home.” Meaning, interest on a HELOC is typically deductible when it comes to home expenses like remodeling projects.

Why HELOCs are Great for Remodeling

For a typical home improvement project, the final amount you pay the remodeler may be uncertain until the job is complete. That’s where the flexibility of a HELOC comes in handy. If you’re approved for a 50 000 $ HELOC and only use 16 000 $ for example on a re-siding project, you only pay interest on the amount actually used.

HELOC monthly payments are also usually much smaller than those for a cash-out refinance or personal loan because you only have to pay interest (not the total amount) during the draw period.

According to Hanley Wood’s Remodeling Magazine’s cost vs. value report, the average cost of a siding replacement in 2019 is about 16 000 $ and it may increase a home’s resale value by about 12 000 $ making it a competitive option. So, if you’re one of the thousands of homeowners who are nearing the end of HELOC draw eligibility, now might be the time to do a competitive comparison on siding materials and get started.

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Renovation5 min

HOW TO USE THE LP® SMARTSIDE® HOME VISUALIZER

Planning to refresh your home's trim and fascia? Hoping to change the exterior entirely with a full re-side project? No matter your plans, choosing siding and trim colors can be difficult. Mentally visualizing how your home will look with a new product is a challenge-and it's even tougher to imagine the amount of change even just updating trim will bring. That's where the LP® SmartSide® Home Visualizer, a siding visualizer tool, comes in. This free tool can help you explore home siding ideas to find the best siding color combinations for your home. Read more to find out how to use the tool-and why LP® SmartSide® Trim & Siding can make all the difference for your home.

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Renovation6 min
Selecting LP® SmartSide® Trim & Siding with Liz Marie Galvan

Re-siding your home is a significant investment and a long-term decision on your home's look. One of the first steps to siding a house is choosing a siding material that fits your needs. Being involved as you review types of siding and cost can give you confidence in your plans and peace of mind that the materials you choose are built to last. Liz Marie Galvan of the Liz Marie Blog shares her journey toward choosing LP® SmartSide® ExpertFinish® Trim & Siding for her upcoming home re-siding project.

Renovation4 min
Checklist for How to Hire a Contractor

In this hiring a contractor checklist you’ll find expert guidance in connecting with the right contractor for your re-side project, including questions to ask and quick tips.

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A Deep Dive into the LP® SmartSide® Trim & Siding Limited Warranty

Let’s break down the limited warranty for LP® SmartSide® Trim & Siding so you can be one step closer to choosing one of the most durable siding solutions on the market.