5 ways to use a HELOC to improve your home

One of the best things about home equity lines of credit (HELOCs) and home equity loans is the freedom they offer to use the money as you wish. 

A HELOC, in particular, offers extra advantages when it comes to flexibility. That’s because you could borrow against a HELOC for several years. It’s perfect for weekend warriors and DIYers looking to tackle home improvement projects on their own time. 

Also, HELOCs only require smaller payments during the first phase of the debt, so it’s more affordable while you’re doing the work. (You’ll fully repay the money you borrowed later, after a few years.) We’ve rounded up some of the best ideas for home improvement projects that’ll pair well with a HELOC. 

1. Catch up on home repairs

If you’re like more than half of all homeowners, you’re probably putting off some much-needed home repairs, according to the magazine Today’s Homeowner. 

Keeping on top of home maintenance is important, and not just so you have a comfortable place to live. It’s often crucial for safety, as well as to prevent problems from snowballing into larger, costlier projects. 

It’s always smart to save money for home repairs in advance. Many people even sleep easier at night knowing they have a dedicated pot of savings for home repairs. 

If you can’t afford that at the moment, a HELOC could be your next best option. An open line of credit means you’ll always have money for repairs when they happen. 

Here are some important (and expensive) home maintenance items that a HELOC could help you pay for:

• Replace your roof

• Install new siding

• Restore your gutters

• Buy a new water heater

2. Add eco-friendly upgrades

Energy-efficient improvements could carry more value beyond just being green. You could see a lot of extra green in your bank account, because you’ll probably save a lot of money on utility bills. 

Plus, with many tax incentives available to lower the cost even further, now’s a great time to get many of these items done:

• Add solar panels and storage batteries 

• Boost the insulation in walls, floors, and ceiling

• Switch your windows and doors with newer, more insulated versions

• Swap out your HVAC system and water heater with a new heat pump

A HELOC would be a natural way to fund these expenses. With so many potentially tax-advantaged projects to choose from, a HELOC could allow you to chip away at your list over time. 

3. Build an add-on or ADU

When you’re a homeowner, you may not be limited by your home’s existing space. If you’ve got the money to pay for it, you’re generally free to modify your home however you want—including making it bigger. This could add a big boost to your home’s value, too.

Many homeowners want to add more room onto their existing home’s structure. If you’re expecting a new addition to your family, enlarging your space means you could give your family members more privacy. 

Another way to make your home bigger is by building separate living quarters. Accessory dwelling units, or ADUs, offer even more privacy, making them perfect mother-in-law apartments or even tiny homes. Some homeowners build ADUs for rental income, an addition that might in time pay for itself. 

4. Renovate to age in place

Everyone’s needs change as they age. Remodeling your home to accommodate those changes could help you live more comfortably as you grow older and even allow you to remain in your home for a longer period of time. 

It’s not really possible to know what specific adjustments you’ll need to make. No one has a crystal ball, so there’s no way to predict what might be most useful to you in the future. In this case a HELOC might be extra handy, since it would allow you more flexibility to pay for changes as you find you need them.

For example, people often need to make the following renovations to make their homes safer and more convenient to maintain as they age:

• Increase wall supports in bathrooms

• Move major living areas to the main floor

• Install a stairway lift or home elevator between floors

• Add low-maintenance landscaping and exterior siding

• Boost lighting in dark areas like hallways and mudrooms

5. Add luxury touches

Finally, don’t discount home renovations and improvements simply because you like them. Not only could you design the home of your dreams, but there’s a good chance you could also boost your bottom line. Many home upgrades offer an immediate return on your investment by increasing your home’s value, thereby increasing your net worth. 

Here are some of the home improvements offering the highest return on your investment (ROI), according to a recent report from Today’s Homeowner: