Think a Home Equity Line of Credit (HELOC) is just for home renovations? It can actually support a wide range of financial goals – from funding education, covering medical expenses, and consolidating debt, to making lifestyle purchases like a vacation or recreational equipment. A HELOC can also be a powerful asset in building long-term financial wellness when used wisely.
What is a HELOC?
One of the greatest financial advantages of owning a home is the ability to build equity as you pay down your mortgage and your home value increases over time. Once you have accumulated enough equity in your home, you can tap into that equity to cover major expenses and improve your overall financial health.
A HELOC allows you to borrow against your home equity in a revolving line of credit that works similarly to a credit card. HELOCs typically provide access to as much as 80% of your home’s value and have variable interest rates that can change over time based on the fluctuation of market conditions.
A HELOC’s draw period – the amount of time you have to access funds – is usually around 10 years. Borrowers can draw from the funds as needed throughout this period, and, typically, only interest payments are required. Once the draw period ends, the repayment period usually ranges from 10 to 20 years.
To obtain a HELOC, you will likely need:
- At least 15-20% equity in your home
- A credit score of at least 620
- A low debt-to-income ratio
- Proof of consistent income
- A strong history of mortgage and other debt repayment
- A home appraisal to determine your property value.
Understandably, people often confuse the purpose of HELOCs with home equity loans. While they both allow you to borrow against the equity in your home, they offer different features. Instead of a revolving line of credit with a variable interest rate and flexible repayment terms, home equity loan funds are received in one lump sum at a fixed interest rate, repaid starting on day one.
The traditional role of a HELOC
Most people think of HELOCs as a way to pay for home and property upgrades. They can range from small updates, like installing a new front door, floor, or roof, to major projects like remodeling a kitchen, finishing a basement, or building a garage. Some borrowers use a HELOC to expand their home, build a deck, make energy efficiency upgrades, or improve their landscaping.
With recent factors such as the pandemic, inflation, tariff uncertainty, and advancements in digital banking, more people are turning to HELOCs to protect their finances and enhance their lives. As HELOCs gain popularity, homeowners are now exploring additional ways to convert equity into opportunities.
Innovative uses for a HELOC
As a homeowner, there are creative ways to get more from a HELOC, including covering education costs, consolidating high-interest debt, or financing a start-up business.
Additionally, some borrowers leverage the funds to make a major recreational purchase – such as a boat, RV, or ATV – or to buy an automobile outright instead of financing.
You might consider using a HELOC to fund significant life events such as weddings, adoption, or medical expenses. With the help of a HELOC, you could finally take that dream vacation. You can also use a HELOC to make investments and other strategic financial moves – or using it as an emergency fund backup or financial cushion.
A HELOC can also be used to purchase a second home. Funds can cover the 20% down payment, avoiding the need to pay for private mortgage insurance on the new property.
How you use a HELOC is a personal choice. You should take your goals and ability to repay into consideration. While a HELOC can open the door to all kinds of possibilities, it does come with risks. However, when used responsibly, a HELOC can serve as a smart financial asset.
Leveraging a HELOC for financial wellness
If you are a financially disciplined homeowner, a HELOC can be more than just a loan – it can be a pathway toward long-term financial wellness and greater financial flexibility.
Here are some ways a HELOC can help build wealth for your family:
- Interest rates are typically lower than non-dwelling secured loans.
- Interest is only charged on what you use, as opposed to the whole lump sum.
- Interest-only payments during the draw period mean lower payments.
- You have flexibility in how to use the funds.
- Funds are more accessible than with other home equity products.
Leveraging a HELOC to make home upgrades can add to the value of your home and increase your return on investment. They can help create additional income streams – such as a rental property, small business, or stocks and bonds. HELOCs can also be used to consolidate bad debt, leaving more money for saving or investing.
Jean Chalifoux Kiely, Executive Vice President and Director of Consumer Banking at Sunrise Banks, stresses the value of a HELOC when used responsibly as a strategic tool for harnessing your home equity to support your financial goals.
“A common myth is that HELOCs are risky or are only for emergencies. In reality, they are a smart financial tool when used thoughtfully,” she says. “HELOCs can support a wide variety of expenses. The key is understanding how they work and aligning them with your financial goals.”
Things to consider before applying
A HELOC’s versatile and flexible characteristics make it an attractive way to strengthen your financial health and enhance your life. However, it is important to understand the drawbacks of borrowing against your home’s equity.
When securing a HELOC, you are taking out a second mortgage on your home – increasing your financial commitment each month and, in some cases, risking foreclosure.
“A HELOC is not a blank check, so you should avoid using it for short-term indulgences or non-essential items,” Chalifoux Kiely cautions. “Because your home is the collateral, it is best to use the funds for things that build long-term value, like home upgrades or paying down high-interest-rate debt. Think of it as a way to strengthen your financial foundation, not stretch it thin.”
Chalifoux Kiely offers the following advice for using a HELOC responsibly: “Start with a plan. Be intentional not only about what you will use HELOC funds for, but what you won’t. When you do use your HELOC, keep track of your spending and only draw what you need.”
“If your bank offers a fixed rate option, consider using that for larger expenses to gain the peace of mind that comes with a predictable payment,” she adds. “Most lock-in options give you the best of both worlds, since you can still access the rest of your line.”
Chalifoux Kiely recommends working with a banker to help you understand your options and run payment scenarios for you so that you can make an informed decision.
“If you decide to keep the variable rate option, keep an eye on rates and stay informed,” she says.
Take advantage of your home equity
As homeowners look for alternatives to refinancing their mortgages, HELOCs are increasing in popularity because of their versatility, flexibility, and lower upfront costs. Lenders are also innovating, offering hybrid products that combine revolving credit with fixed-rate lock-in options, making HELOCs even more attractive in the current market.
“Now is a great time for a HELOC because mortgage interest rates are still slightly elevated,” says Chalifoux Kiely. “Many homeowners are choosing to stay in their current homes and invest in them instead of moving. This allows you to keep your lower interest rate on your primary mortgage but also tap into your home’s equity. If you are planning a project or need flexible access to cash, now is a great time to explore this option.”
Ready to apply for a HELOC? Sunrise Banks has you covered with an easy and convenient online application. For more information or to connect with one of our trusted loan officers, visit our HELOC webpage.
Now through September 30th, 2025, you can apply for a HELOC with no closing costs.*
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