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

Read Time: 3 Minutes Date Published: February 03, 2025

A HELOC^ is a form of home equity financing where you borrow against the existing equity in your home. This revolving line of credit will have its own repayment schedule. The amount of the loan a homeowner can qualify for is largely based on the amount of equity in the home. You can use the funds for everything from college tuition to consolidating higher-interest-rate debt.

Read on to learn how a HELOC works and some of the most common use cases.

Cash When You Need It

 A HELOC works like a credit card in that you have a set amount of money available to borrow and pay back. Similarly, you can take out money when you need it, and only pay interest on the amount you borrow. In many cases, once the loan repayment begins you will have twenty years to repay any outstanding balance.

A HELOC often has a lower interest rate than some other common types of loans, and typically once the line of credit repayment begins you will have up to twenty years to repay any outstanding balance.

How It Works

A HELOC’s rate is adjustable, which means it can increase or decrease according to designated benchmarks. The adjustment index for the ARM is the Prime Rate published in the Wall Street Journal for the preceding calendar month and adjustments occur monthly or as the underlying Prime Index may change. Therefore, your monthly payment may increase or even decrease. You will be making two payments on your house versus one – your existing mortgage and your payment on the HELOC.

There are two phases of a HELOC:

  • The draw period, when you can borrow money from the account, up to your approved limit. You have to make interest payments, but payments towards the principal are optional.

  •  The repayment period, when you can’t take out more money and have to make both principal and interest payments until you’ve paid off what you’ve borrowed. With the addition of principal, the monthly payments can rise sharply compared with the draw period. The length of the repayment period varies.

 

Popular HELOC Uses

Let’s take a closer look at some popular ways to use the money generated from doing a HELOC.

  1. Home Improvements: Renovating and remodeling your home can make it seem like you moved to a swanky new space. It can also help you increase your home’s value by making key upgrades such as updating the kitchen and bathrooms and installing energy-efficient windows. 

    Some home improvement projects where the value exceeds the cost can help you build equity, and you could ultimately have a house that’s worth more than what it was before the upgrades.

  2. Emergency Expenses: Oscar Wilde once said, “always expect the unexpected.” This adage would especially apply when it comes to things like the air conditioner going on the fritz just as a heatwave hits town. A good way to prevent having to try and sleep in the backyard hoping for a breeze is to keep a portion of your budget aside for an emergency fund that can get the old air conditioner back up and running quickly.

    Car repairs are another example of an unexpected bill. Everything is going fine and then there goes that “check engine” light. A HELOC can be a creative way to help keep your wheels truckin’ on down the road.

  3. Debt Consolidation: Credit card debt can cost you thousands of dollars each year in interest payments. Short-term debt, such as credit cards, usually has higher interest rates than mortgages. Consolidating your debts relieves you of multiple monthly payments and may provide significant monthly interest savings. Using your HELOC funds to pay off credit cards could be smart.
     
  4. Wedding Day: Weddings are a big deal and a day of pure joy but unfortunately can cost a pretty penny. However, you still may want to make a statement of affection for the big celebration. Doing a HELOC can supply the funds to help ensure it’s a day to always remember. 

  5. Business Expenses: Business owners sometimes need some extra cash to pay for new equipment and supplies, as well as expected or unexpected expenses. Others use the funds to start the business they’ve always dreamed of. Either way, funds from a HELOC can help propel a business. 

  6. Pet Bills: Pets are a unique part of the family. However, sometimes our furry friends suddenly need veterinarian care their bills can get very expensive in a hurry. You’ll find a way to get them the care they need but funds from a HELOC can position you to better handle the high expense. 

 

The Power of a Newrez HELOC

 At Newrez, we believe in maximizing your home’s potential and that homeownership is more than just having a place to live; it’s about making your home work for you. We’re committed to finding the best solutions for homeowners at every stage of life. Our HELOC is designed to give you the flexibility and financial freedom you need and we’re ready to help you get started. Here’s a few highlights to check out:

  • Cash amounts available from $50,000–$350,000
  • Withdraw funds whenever you need for anything you choose
  • Only pay interest on what you borrow

Contact us today to explore the benefits of a Newrez HELOC.

 

The Bottom Line:

As a homeowner, you have the power to use your investment (your home) however you wish. Before deciding whether to apply for a HELOC, consider how much money you really need and how you plan to use it. Factor in interest rates, fees, monthly payments and tax advantages as you weigh your options. If you want to explore how you may be able to use your home to your financial advantage, we’re here to help!

Learn more in our other educational series.

We’ve assembled a treasure trove of jargon-free information to demystify home-financing and arm you with valuable insights and actionable options.

Why Newrez?

Newrez believes the lending business shouldn't just be about home loans - it should be about homeowners. That's why our employees get to know our customer's real needs, through final closing, and beyond.

Industry leading loan options
Simple pre-qualifications and application processes
Loans for everyone, from seasoned investors to first-time buyers
Putting power back into underserved communities

Disclosures

By refinancing an existing loan, the total finance charges may be higher over the life of the loan.

††The rate on your existing mortgage will not change. The Newrez Home Equity Loan program requires borrower to obtain a second mortgage at current market rates. Loan amount based on underwriting guidelines. Minimum 660 credit score. Minimum and maximum loan amounts apply. Program financing only available on properties with one existing mortgage lien and subject to maximum loan-to-value ratio. Not available in all states or territories. Other terms and restrictions apply. Please contact us for more information.

^ This HELOC is an open-end line of credit, available on owner occupied properties, where 75% of the approved full credit limit (minus the origination fees) will be drawn at the time of closing. Additional draws may be available after a 90-day period within the first 3 years not to exceed the available credit limit. Actual rates available to you may vary based on several factors including your credit score and combined loan-to-value. Loan amounts range from $50,000 to $350,000. We may determine home value and resulting equity through independent data sources and automated valuation models. An appraisal may also be required. Only available for eligible borrowers and property types. Not all applicants will be approved, pre-approval is based on data you have provided and certain assumptions that must be verified and subject to underwriting approval. Not available in all states or territories. Contact Newrez for more information.

This is not a commitment to lend. All loan programs are subject to credit, underwriting, and property approval. Programs, rates, terms and conditions are subject to change without notice. Other restrictions apply.