With a large percentage of the population working - and learning - from home throughout the pandemic, the number of people reinvesting in their homes through remodeling or renovation projects has been on the rise.
A recent study from Harvard University found that spending on home improvement projects grew by more than 3 percent in 2020. This was during the same period when the overall U.S. economy shrank by 3.5 percent. The study forecasts another epic year for home remodeling this year.
The pandemic has seen more people creating designated spaces to work from home or for their children to log on for remote learning. It has also been a time when people have tackled their home improvement to-do list while spending most of their time homebound. Also, with housing shortages and skyrocketing home prices in many parts of the country, some people have opted to make home improvements rather than buying a new home. Others have made improvements to get their home ready to sell.
If you are considering joining the home improvement movement, you will need to consider how to pay for the costs without wiping out your savings.
A HELOC is a loan that uses your home's equity - the difference between what you owe on your home and what your home is currently worth - to help you pay for expenses like home improvement projects, your child's education, consolidated medical bills or credit card debt and any other current or future expenses.
A HELOC provides a readily available Line of Credit
Similar to a second mortgage, or even a cash out refinance, a HELOC gives qualifying homeowners the ability to borrow a certain amount of money and access the funds as needed. If you do not end up withdrawing any money, you will not owe anything on the loan. This may be better than a cash out refinance as you will pay interest on the entire amount of your loan from the day you close. A HELOC is a nice security blanket for unforseen events that life may throw at you. A HELOC will also give you the flexibility to withdraw funds, pay back the principal when you can, and even withdraw later during the initial draw period without paying additional lending fees.Learn how to qualify for a HELOC.
A HELOC may be more affordable than making large purchases by credit card or by starting another type of loan if you qualify for a competitive interest rate and do not have to pay annual renewal fees. You may also qualify for additional tax deductions available for any costs or interest paid on your HELOC based on your situation. Please consult your tax professional regarding the deductibility of interest and charges.
There is typically a "draw period" with a HELOC, a fixed time allowing you to withdraw money and make interest only payments on the amount borrowed. This draw period varies by lender, WaFd Bank's draw period is 10 years. After the initial draw period, if you have an outstanding balance remaining on your HELOC, you will begin paying monthly payments amortized over a 15-year period.
Using Home Equity for Renovations with WaFd Bank
If you are ready to start on your own home improvement project, let WaFd Bank help you explore your financing options. Learn more or apply for a HELOC, or find your neighborhood loan officer at WaFd Bank.
WaFd Bank offers:
- No annual renewal fees*
- Competitive interest rates (and discount off your interest rate for automatic monthly payents from your checking account through WaFd Bank)
- Closing costs paid by WaFd Bank for customers with existing home loans through WaFd Bank seeking up to $250,000 in lines of credit
- HELOCs for primary homes, second homes and investment properties (this includes jumbo HELOCS up to $700,000)
- Interest-only payments for 10 years
MEMBER FDIC, Equal Housing Lender, All loans subject to credit approval. Restrictions apply, contact WaFd Bank for futher information.
Related Articles:Learn About a Home Equity Line of Credit (HELOC)
* The rate will never exceed 17.99% APR. Interest rate and APR (Annual Percentage Rate) are variable based on the Wall Street Journal Prime Rate plus a margin subject to credit approval of your credit history, loan to value, occupancy and EZ Pay requirements.
** Texas HELOCs: Notice concerning extensions of credit defined by section 50(a)(6), article XVI, Texas constitution: Section 50(a)(6), article XVI, of the Texas constitution allows certain loans to be secured against the equity in your home. Such loans are commonly known as equity loans.