Ten Situations Where a Home Equity Loan is a Smart Idea

After a number of years paying your mortgage, you're bound to reach a point where you owe much less than your home is worth. This is called equity. You can borrow against equity to improve your home or make lifestyle changes that benefit you in the long run. Here are ten reasons a home equity loan becomes a smart investment.

Debt Consolidation

Emergency car repairs, unexpected expenses, these are both reasons you may find your credit card debt getting out of hand. While it is important to try to refrain from carrying a balance on your credit card, if you're paying 15, 20, or even 25% interest, it's better to talk to your home loan provider about using a home equity loan to get that money paid off at a much lower interest rate.

Fuel-Efficient Furnace

According to the National Association of Home Builders, the average lifespan of a furnace is 15 to 20 years. After that, you'll likely need to replace it. Take out a home equity loan to make this important upgrade. You can greatly cut your fuel consumption and lower your yearly heating costs in the process.

Home Addition

When the size of your family exceeds the space you currently have, you're usually left with two options. Move to a larger home or expand the home you have. A home equity loan makes it possible to add a room or two to your home.


Adding insulation to the roof and walls of your home is an excellent way to keep heat from escaping in the cooler months. A home loan can help you finance the expense of having professionals perform a home energy assessment and then make necessary improvements to lower your heating costs.

Lower Interest Rate

If you have a personal loan, credit cards, or home equity loan with a higher interest rate than current home loan rates, move them to a low-interest home equity loan to save money. The amount you can save puts extra money in your pocket.

New Septic

Most septic systems last 20 to 30 years, less if trees are planted over the leach field. It's unlikely you have enough cash set aside for this expensive job, so a home equity is an affordable way to fund a septic replacement.

Solar Panels

Not only do solar panels reduce or eliminate your electricity bill, but living in a state with net metering also ensures your electricity company pays you for every kilowatt-hour of energy produced in your home. With a home loan, you could tap into the power of the sun and start earning money.

Upgrade Washer and Dryer

Newer washers use less water than previous models. This means the clothes that have been washed are also dryer and take less time in the dryer. This will save you a lot of money when it comes to electricity bills, gas usage for a gas dryer, and water consumption.

Vinyl Siding

Homes covered in clapboard need regular painting to keep rain from damaging the wood. If you upgrade to vinyl siding, your home is wrapped in a protective weather barrier and then covered in a colorful siding that doesn't need painting year after year.

Well Repairs or Replacement

If you have a dug or drilled well, you need it to be operational for your showers, laundry, cooking, and drinking water. Well pumps tend to last 10 to 15 years, so you do have that expense to consider. If your well suddenly dries up or the water condition changes so that it is no longer safe, you will need to drill deeper or replace the well completely. Consider a home loan for this necessary and often urgent job. Read also: Have you tried Direct Express Loans?