For clients who’ve closed on a home and want to make energy-efficient updates — or clients looking to make similar upgrades prior to selling — a home equity line of credit could be a great option to help pay for a wide range of home improvements.
Energy-efficient upgrades in particular are a great way to both add value and reduce expenses in the long term. Installing insulated windows or updating heating and air conditioning systems are relatively simple projects that can help clients lower their utility costs — but clients may also want to consider integrating these smaller updates into larger upgrades like a kitchen or bathroom remodel. Of course, these projects can get expensive, which is why a home equity line of credit (HELOC) could be a good resource for your clients. In fact, home improvements and remodeling have traditionally been among the most common reasons homeowners take out a HELOC.
There are a number of benefits to using a HELOC to pay for planned upgrades:
- Flexibility. Once someone opens a HELOC, they may draw out funds as needed up to a predetermined credit limit.
- Convenience. Most financial institutions provide checks that can be used to pay directly from the client’s HELOC for services used (for example, a contractor) and purchases made (for materials, appliances, etc.). Or, they can use secure online banking to transfer funds from a HELOC to their checking account to pay for home improvements.
- Low interest rates. Typically, the interest rates on a HELOC are much lower than on most credit cards.
- Possible tax advantages. Tell clients to check with their financial advisor to learn more about what kinds of tax advantages they may qualify for with a HELOC.
The Bank of America Real Estate Center can help clients figure out how much they may be able to borrow for a HELOC. Once they go to the site and type in their home’s street address, they’ll instantly see an estimated range of what their home is worth. Generally, they’re allowed to borrow a portion of their home’s equity (defined as the appraised home value less what is owed).