Maximize Your Home's Value with a Home Equity Loan

Homes in your area are generally appreciating by 4% year over year. So unlock its potential with a home equity loan that puts your property's value to work for you.

What Is A Home Equity Loan?

A home equity loan takes the equity you've built, the amount you have paid on your home, plus appreciation, and borrows against it to fund different areas of your life. As property values continue to appreciate, your home becomes an increasingly valuable resource that can help fund your financial goals.

Home equity loans often come in fixed-rate or line-of-credit options. A fixed-rate loan is one in which the loan amount is determined by the property's value and paid in installments. A home equity line of credit (HELOC) is a variable-rate loan under which the lender agrees to lend a maximum amount over an agreed-upon period, similar to a credit card.

Because on average, homes appreciate by 4% every year, even with inflation, your home is continuously building equity you can use. 

How Can I Use A Home Equity Loan?

A home equity loan can be used for just about anything!

Consolidating higher-interest debt into a single, easy-to-manage payment is a popular use for home equity loans. By combining multiple debt obligations into a single payment with a lower interest rate, you can reduce your monthly financial burden and save significantly on interest charges over time.

Other uses include home improvement projects that can increase your home's value, emergency cash, paying medical bills, purchasing a vehicle, financing travel, funding education, combining a first and second mortgage into a single payment, and much more.

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How Much Can I Borrow?

Lenders use a calculation called the combined loan-to-value (CLTV) ratio to determine how much you can borrow on your home. In the Midwest, financial institutions generally borrow up to 80-85% of a home's appraised value minus the remaining mortgage balance. At Levo Credit Union®, members can borrow up to 90% of their home's value.

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What If I Don't Have Enough Equity In My Home To Do Updates?

A home equity construction loan can help if you have a large renovation, but not enough equity for a home equity loan. This loan allows the borrower to use future equity in their home as collateral to complete a remodel, renovation, and/or addition. The loan is determined by a "subject-to" appraisal, meaning the home's value is contingent on the project's completion.

Essentially, your lender will give you the equity in advance to complete the project. 

Is The Interest Tax-Deductible?

Short answer: It depends.

According to the IRS, the interest you pay on a home equity loan or HELOC can be tax-deductible if the funds are used to buy, build, or substantially improve the home that secures the loan. Interest on a home equity loan or HELOC used to pay for personal living expenses, such as credit card debt or medical bills, is not tax-deductible. 

Check with your tax professional to see if your loan's interest is tax-deductible.

Next Steps

Whether you're ready to renovate your kitchen, consolidate higher-interest debt, or fund your child's education, your home's equity could be the key to making it happen.

Contact Levo today to speak with one of our experienced loan officers. Visit Levo.org or stop by one of our branches to get started.

A home equity loan and a HELOC act as 2nd-lien mortgages, attaching to your home as collateral. If you are unable to repay the loan, foreclosure is possible.