5 Smart Ways to Use a HELOC (Home Equity Line of Credit)

When homeowners need money to further life goals, wide-reaching options are available. From payday loans to credit cards, expensive high-interest products are available to consumers with or without collateral. But property owners who have built up equity have the advantage of leveraging that valuable resource. By working with a local lender, qualified borrowers enjoy access to a flexible Home Equity Line of Credit (HELOC). And when used wisely, a HELOC delivers economic security and quality of life improvements.

1: A HELOC can be Used to Finance Educational Expenses

When parents make the decision to send a child to a private school or college, the overall cost and how to pay for it are two significant factors to consider. How much private school costs depends on many factors, including where the school is. According to US News, parents in America can expect to pay around $12,350 per year for elementary and high school tuition, higher if the school is in New England. The price can increase even more for college.  Bloomberg News reported that in 2021 parents were paying more than half of their children's college expenses which equated to $26,733 on average for the 2020-2021 school year.  It’s no secret that student loan debt has become a crushing burden for graduates and families. Whether you are considering sending your child/children to private school, college, or university, these are educational expenses a HELOC can cover.


A Home Equity Line of Credit can be used similar to a credit card or checking account. Homeowners can cover tuition as it comes due per semester.

Books and Supplies:

Because borrowers decide how much to use during the draw period, planning for expenses that fluctuate throughout the school year is unnecessary. Emerging expenses simply require homeowners to withdraw the necessary funds.

Room and Board:

A HELOC creates tremendous flexibility for parents. A HELOC can cover room and board for on-campus or off-campus living.


Whether attending a private school or college drivers of age all require a reliable automobile and added auto insurance. Using equity to purchase a reliable pre-owned vehicle can reduce the interest borrowers usually pay on car loans.

A stipend or allowance for unanticipated expenses may be a good solution for parents with children further away from home, easily accomplished by transferring money into an account the student can access.  Young adults learn how to budget their expenditures, and even if they make mistakes, it's better to learn valuable lessons now than when using a credit card.

Savvy financial planners leverage the equity in their homes to pay for private school tuition or college without accumulating debilitating debt. During a semester, interest-only HELOC payments can be made to minimize monthly expenses. Some parents pay off the withdrawn funds relatively quickly and maintain access to the maximum approved Home Equity Line of Credit.

2: HELOC Can Be Used to Purchase Other Real Estate

A Home Equity Line of Credit can be used to purchase a second property. Lenders usually consider the equity in your home to be the equivalent of cash. 

Putting the home's equity to work can be as flexible as using cash.  Qualified borrowers can use this accessible cash to invest in real estate, using the funds for a down payment on a second home or investment property. Below is a list of potential benefits HELOC borrowers can experience:

  • Use of HELOC to maintain savings
  • Increase property ownership and improved financial portfolio
  • Increase in personal wealth

It’s important to keep in mind that the borrower’s home is used as collateral. Entrepreneurs who want to make money purchasing and flipping houses should understand the risks. If the investment property lingers on the market or suffers a loss, the borrower could effectively squander valuable equity. It may be wise to garner house-flipping experience before considering a Home Equity Line of Credit to fund such a project.

A similar warning is true for homeowners who use equity to purchase a second home or investment property. A financial setback could leave borrowers in a tight financial position as the real estate and rental markets cycle through highs and lows. Borrowers would be well served to conduct thorough due diligence and estimate whether they can afford a HELOC during an economic downturn.



Explore how a HELOC can help you get the money you need by downloading our free guide:

Top 12 Home Equity Line of Credit (HELOC) Questions Answered


3: Use a HELOC to Finance Home Improvements

Making repairs and upgrades rank among the most popular uses of a Home Equity Line of Credit. Property owners who put equity to work are reinvesting their money in a fashion that buoys or increases market value. The saying “it takes money to make money” certainly applies to using a HELOC to finance home improvements. These rank among the top upgrades and repairs that deliver sound return on investment.

  • Expansive kitchens with updated appliances
  • Repairing an aging or damaged roof
  • Replace failing heating or cooling system
  • Installing energy-efficient windows
  • Remodeling a bathroom
  • Build or renovate an attached garage
  • Build a deck or patio
  • Expand the home’s living space with an addition

One of the primary reasons people prefer a HELOC to a home equity loan is that borrowers can withdraw only the money needed to pay for a project. Lump-sum loans sometimes result in borrowers paying interest on unused funds or falling short of the total cost of a renovation. Typically, estimates provided by contractors do not include unforeseen expenses that may drive the price up.

4: A HELOC Can Offer Emergency Funds for Unplanned Expenses

Financial planners advocate developing emergency cash resources that cover 3-6 months of expenses. Putting the funds in a savings account makes perfect sense for most people. This strategy has proven useful when short-term layoffs or illnesses cause people to miss work. But prolonged financial challenges may call for determined measures. A HELOC provides extended, low-interest borrowing power for unanticipated expenses such as the following:

  • Cover the cost of medical bills, long-term health care, and rehabilitation
  • Funeral expenses in the event a loved one passes away without insurance
  • Automobile or home repairs
  • Pay for living expenses while out of work
  • Fund business expenses during a downturn or temporary closure

Having an emergency fund in place provides people with economic security to overcome minor obstacles. When prolonged adversity threatens financial wellbeing, a Home Equity Line of Credit can be the perfect solution and provide peace of mind that HELOC funds are at your fingertips should the need arise.   After all, HELOC borrowers only make payments on the funds used.

5: Use a HELOC for Debt Consolidation

According to Credit Karma, the average American carries more than $5500 in credit card debt. Paying high interest on wide-reaching debts has a debilitating effect on the quality of life. Multiple accounts, high-interest personal loans, and basic living expenses leave little for leisure spending. Fortunately, a HELOC can be used to combine outstanding loan balances into one manageable monthly payment. The following list of debts and more can be combined using a Home Equity Line of Credit.

  • Credit cards
  • Auto loans
  • Boat loans
  • Gas cards
  • Payday loans

By working with a local bank professional and applying for a HELOC, qualified borrowers can save money on high-interest balances. Not only do homeowners save more of their hard-earned money, but they can also enjoy a better financial quality of life.

If you are a homeowner wanting to consolidate debt, face unexpected expenses, finance home improvements, or need money to pay for tuition, college, or a wedding, a HELOC maybe your best option. Contact Middlesex Federal Savings and schedule an appointment with a lending professional you can trust.

To explore how to qualify for a HELOC and discover how much you can borrow, review our "Top 12 Home Equity Line of Credit (HELOC) Questions Answered" complete guide!

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