Cash out and cash in with a HELOC

A home equity line of credit (HELOC) can make financing home repairs easy. It resembles a revolving charge account: once you obtain the loan, you can draw on it, pay it back, and draw on it again.

With home repairs, you seldom need all the cash at once. A HELOC allows you to borrow cash only when you need it, and pay it back as you go.

Keys to HELOCs

HELOCs have a life cycle. They're usually issued for a term of between 5 and 20 years, but most are in effect for about 15 years. That span is divided into two parts: the draw down period and the repayment period. Once you enter the repayment period, you'll no longer be able to draw cash.

Checks, electronic transfers, or a credit card attached to the account are used to get the cash you need.

The payments vary according to the home equity line of credit rate and the outstanding balance. HELOC rates are variable and fluctuate regularly. As always, ask questions and make sure that you understand the terms of your loan before signing on the dotted line.

If you're making improvements in order to sell your home, make sure that you obtain your HELOC before you actually put the house on the market.

Home improvements that pay off

When it comes to home improvements that hold their value, the big four are bathrooms, kitchens, windows, and siding. Bathrooms lead the pack, and sometimes increase the value of the home by more than the cost of the project. But if you spend $1,000 on any one of these items, you can expect the price of your home to increase by at least $890.

Now you know how to use the equity in your home to improve your home's value. Once you obtain your HELOC, pick a project, take a draw, and get started!