Things You Can Use Your Home Equity For

Use your home equity to fund major expenses.

If you are a homeowner in need of money, your home could provide a solution. A home equity line of credit uses your home as collateral. Your home's value is a deciding factor in how much credit you receive. You should not use home equity credit for expenses such as cars or vacations or unnecessary indulgences like consumer electronics. According to the Federal Reserve, most homeowners reserve home equity credit for major expenses.

Home Remodeling

Home remodeling serves many purposes. Mostly notably, it increases your home's value. This can be a smart move, especially if you are planning to sell. Remodeling also may be necessary to repair your home following a disaster, such as a tornado. When funded by home equity, home remodeling can be a worthwhile expense that will give you a substantial return on your investment.

Tuition

College tuition is expensive and steadily growing. Parents may not have enough money for tuition even if they have been saving for it. Home equity credit is a good source for that additional money. Home equity is less expensive than a personal loan. The interest rate is lower, and you can access the money on an as-needed basis. Instead of getting a lump sum, withdraw what you need each semester.

Retirement Funds

The future of Social Security is uncertain. Investing in an individual retirement account (IRA) is an investment in your future. Invest in real estate, stocks, bonds or any other investment vehicle. You can funnel money from your home equity into a retirement account you could not otherwise afford.

Property

Owning rental property is often a wise investment. It provides a steady source of income when occupied. Rent will continue to come in long after the home equity money is repaid. When the time is right, you might be able to sell the rental property for more than you paid. You could also make the property a second family home.

Small Business

Starting your own business is risky. However, just about every business starts as a small business. If you need start-up funds, your home equity credit might provide the solution. Before investing your money in a start-up business, carefully assess the risk. But if you think your business idea has promise, consider using your home equity credit for start-up funds.

References

• The Federal Reserve Board: What You Should Know About Lines of Credit
• Financial Web: Best Uses for Home Equities
• Bankrate: Financing for College