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Using Home Equity to Remodel Your Home

With homeowners already spending 30% of their income on housing costs, it’s no surprise that homeowners are hesitant to purchase a new home in today’s market. What about if your current home isn’t meeting your needs? Using equity to remodel can help you add more space to your home or bring your dream-HGTV kitchen to life. 

There are two options for how to use home equity: a home equity loan and a home equity line of credit (HELOC). Each option has their unique advantages. Based on your needs your National Exchange Bank & Trust lender can help you determine the best option.

What is home equity?

Equity is determined by the appraised value of your home minus the balance of your home loan. For example, if your home is valued at $300,000 and your mortgage balance is $200,000, you would then have $100,000 in home equity. Assuming you meet eligibility requirements, you are able to use a percentage of your home’s equity to make improvements to your home using a home equity loan or home equity line of credit (HELOC). Each option here is a secured loan with more attractive interest rates than using traditional lines of credit, such as a credit card or a line of credit from a home improvement store.

What is the difference between a home equity loan and a home equity line of credit?

A home equity loan is a lump sum loan, typically determined by the cost of the project. A home equity line of credit (HELOC) allows the borrower to draw funds as needed up to a certain dollar amount and payments are calculated as the line of credit is used.

Differences between a Home Equity Loan and HELOC
Home Equity Loan HELOC

Available as a lump sum.

Similar to a credit card, use the funds as needed based on your pre-approved amount.

Fixed or adjustable interest rate terms with monthly payments.

Interest-only payments (interest rates vary over time) are an option. Pay down on principle to free up available credit.

Closing costs similar to a first mortgage.

Lower closing costs than a Home Equity Loan.

Best for one-time large expenses.

Best for when you need access to funds at different times.


Home equity loans are great to use for large, one-time expenses. HELOCs make sense for ongoing projects and improvements or even as a smart way to pay for other expenses such as tuition, vehicles, or emergencies. The loan that is best for you may depend on factors such as your plans for selling the home, the length of time you plan to live in your home, the type of improvement and the value the improvement will add to your home.

If a HELOC or Home Equity Loan sounds like the right solution for your family, apply online and a representative will be in touch!

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