You probably know that you may get a tax deduction* for the interest you pay on your home mortgage. Did you also know you may qualify for a tax deduction* if you borrow against the equity in your home?
One popular version of an equity loan is called a home equity line of credit (HELOC). This is a variable-rate loan which provides homeowners with a revolving line of credit, much like a credit card, but it's secured by the equity in your home. Borrowers can draw money from the line when they need it and make monthly payments based on the amount of money borrowed and the current interest rate.
According to Citizens Bank of West Virginia's Executive Vice President and Chief Financial Officer Nathaniel Bonnell, "A home equity line of credit gives borrowers the flexibility to access funds when a need arises. At Citizens, accessing your line is as simple as writing a check, swiping a HELOC debit card, or transferring money to your checking account via online banking."
Aside from potential tax benefits, Bonnell explained that HELOCs have other benefits for consumers. "Home equity lines currently provide great low rates that are typically lower than credit cards and other consumer loans. You have cash readily available when you need it which may be used for absolutely anything you wish. A HELOC provides a convenient way to finance home remodeling, upgrade kitchen appliances, purchase an automobile, or cover short-term, recurring costs such as college tuition bills. Additionally, we have had many customers take advantage of the current HELOC promotion with a 3.25 percent interest rate** to consolidate debt into a single monthly payment."
While a home equity line of credit has many borrowing advantages, you must also be a conscientious borrower when using this type of loan.
"A home equity line of credit is a tremendous financial tool and while you may use your home's equity for any purpose you want, we do caution consumers when leveraging their home for cash," Bonnell explained. "You want to make sure you understand all the terms of a home equity line and have the means to repay the debt without compromising other bills. You have to make smart choices when it comes to splurging on luxury items or keeping the line available for real necessities."
*Borrowers should consult with an experienced tax adviser on the deductibility of mortgage or home equity interest.
**See Citizens Bank's advertisement on page 2 of this supplement for details.