Unlock More Cash: HELOC vs. Home Equity Loan – Which is the Best Option for You?

Your Home’s Hidden Treasure: Leveraging Home Equity for Renovations

Have you noticed a surge in home values in Vermont and New Hampshire recently? If so, you may be sitting on more home equity than you realize. This untapped resource can be utilized through a Home Equity Line of Credit (HELOC) or a Home Equity Loan to fund those long overdue home improvements. Let’s delve into the nuances of these two financing options, their best uses, and what to consider before diving in.

Differences Unwrapped: HELOC vs Home Equity Loan

1. HELOC: Picture a versatile loan allowing homeowners to tap into their built-up equity through a revolving line of credit. The borrowing limit, up to 80% of your home’s value, can be accessed at your convenience, much like a credit card. Flexibility meets convenience with this option.

2. Home Equity Loan: Enter a lump sum second mortgage with a fixed interest rate and scheduled repayments. Unlike the variable interest rate found in a HELOC, the Home Equity Loan locks in a fixed rate for the loan’s duration. Stability and predictability define this loan.

When to Choose a HELOC for Your Renovation Blues?

A HELOC shines in scenarios where multiple ongoing home projects require funding over time. Whether it’s a staged kitchen remodel or a mix of small to medium-sized renovations, the flexibility of the HELOC allows for adaptable funding as each phase unfolds.

When Does a Home Equity Loan Steal the Show?

For larger, one-time home improvements like adding a second story or a substantial renovation with a defined cost, a Home Equity Loan is your go-to. The single lump sum ensures your project has all the financial backing it needs upfront.

Cracking the Code: Best ROI Home Improvements

1. Kitchen Remodel: An 80% return on investment after a $50,000 upgrade is not uncommon.
2. Bathroom Addition: Increased functionality can boost your home’s value by 60-70%.
3. Curb Appeal Boosters: New doors, windows, or siding can offer a robust 60-75% ROI.

Points to Ponder Before Applying

Consider these factors before embarking on your home improvement financing journey:

1. Credit Score & Income: A good credit score and proof of income are crucial for favorable terms and rates.
2. Home’s Value: Borrowing limit is tied to your home’s value and equity, often capped at 80%.
3. Current Interest Rates: Lock in a low rate with fixed Home Equity Loan or consider market trends for variable HELOC rates.
4. Tax Implications: Tax deductibility varies between Home Equity Loans and HELOC, consult a professional for clarity.

Step Up, Apply Today!

At Union Bank, we specialize in navigating the maze of home improvement financing in Vermont and New Hampshire. Let us guide you through the nuances of HELOCs and Home Equity Loans, ensuring your renovation dreams become reality. Don’t let uncertainty stall your vision; connect with our loan specialists to explore the best solutions tailored to your needs. Visit our branches or reach out today – your dream home awaits!