What Are The Pros And Cons Using HELOC To Pay For Home Repairs?

Loan for home repairs

Loan for home repairsThe main advantages of using a home equity line of credit (HELOC) loan involves a lower interest rate compared to other similar loans, such as a reverse mortgage. However, HELOC has certain drawbacks that may be risky if you don’t understand how it works.

If you live in Utah, finding a cheaper rate for a home equity line of credit in Ogden will depend on your credit history. You could apply for one from a bank or a federal, community-based credit union, but you should first determine if you meet certain requirements.

What Are The Advantages?

HELOCs usually incur no fees on loan servicing and only charge low closing fees, so it is a good way to leverage the equity on your property for a big-ticket purchase such as repairs. Aside from a lower interest rate, a HELOC still leaves you with some equity if you decide to sell it or pass it on to your children. This is possible since your loan balance will usually be lower than the value of your house.

In some cases, your interest rate payments could also be deducted to your taxes. You don’t need to reach a specific age to qualify for a HELOC, unlike a reverse mortgage loan. Borrowers may also draw as much money as they wish from an approved HELOC loan. The risks, however, are contingent on the amount.

Understanding The Risks

Couple applying HELOCA HELOC loan with a small limit will obviously be more manageable to pay off, but payments on interest are variable. This means that it would be difficult to estimate your monthly payments, although your contract should state the maximum possible rate that may be incurred throughout the loan’s term.

Those who decide to max out their limit should be careful about this. Your monthly payments could increase beyond your capacity to pay if interest rates increase over time. Borrowers may lose their homes if they fail to pay, which may lead to foreclosure. If the sale proceeds from the foreclosure are not enough to pay off your balance, your lender would still be able to go after you for payments through a deficiency judgment.

Other Alternatives To HELOCs

If you dislike variable interest rates, a home equity loan is an alternative option. This is a better option for those who are already aware of the required amount you need to have, aside from wanting to pay a determined monthly installment.

A reverse mortgage also provides you with nonrecourse, which means that lenders may no longer demand payment for any balance left after a foreclosed home’s sale. Most lenders require borrowers under a reverse mortgage deal to be at least 62 years old. They should also be the primary resident of a property and ideally own the house.


Think carefully about taking out a HELOC loan to avoid spiraling into unwanted debt. If it is necessary, applying for a low amount and relying on your savings fund would be a better option to fund a large expense.