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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Renovation6 min

Home Improvement Show Proves Your Siding Project Can Be A Smooth Journey

The popular Lifetime Channel remodeling show Designing Spaces likes to document the home improvement journey to show that it can indeed be a manageable experience. The program recently shared the story of James and Stella, a professional couple in Wilmington, North Carolina, who did a re-siding project that went smoothly from start to finish.

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Renovation5 min
Tips on Re-Siding in Historic Districts

If you own a home in a historic district, you can forget about replacing the existing siding with vinyl. Most historic districts require replacement siding to closely match the original, hence wood (or engineered wood) and brick. Understanding home building regulations based on historic overlays can help eliminate the headache during renovations, so it's important to stay in the know before embarking on the project.

Renovation5 min
Top Four Home Exterior Tips for Fall

With fall just around the corner, it's time to plan how you will ensure your home's exterior is ready for the cooler temperatures while also keeping up with the latest seasonal trends. Not sure where to start? We break down the top four home exterior tips for fall for a little inspiration.

Trends6 min
Using the Right Siding for a Ranch Home

Ranch-style home designs are known for low and wide single-story profiles, large picture windows, sliding glass doors and attached front garages. These close-to-the-ground homes were first built in the U.S. in the 1920s, but they didn't gain widespread popularity until the post-World War II era into the 1970s. As suburbia spread, the ranch-style house became one of America's favorites. The popularity of ranch-style homes waned in the '80s and '90s, but it's making a comeback as younger homebuyers rediscover the ranch's charm-much like they did with bungalows.