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      Home equity line of credit HELOC documents.
      Wealth Management Insights

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      Wealth Management Insights March 24, 2025

      Does a HELOC Make Sense for You?

      A Home Equity Line of Credit, commonly known as a HELOC, can be a savvy financial tool when used wisely.

      If you’re like many Americans, the value of your home has increased over the past few years. If you don’t want to sell your home, how can you take advantage?

      One possible answer is a Home Equity Line of Credit (HELOC). This tool may allow you to borrow up to 80%-90% of your home equity by using your home as collateral. Reminder: your home equity is the value of your home minus what you owe on your mortgage.

      With a HELOC, you’re able to draw on funds when you need them and make interest-only payments for an extended period of time. In this way, it’s like a credit card—you can spend as little or as much as you like, up to your limit. However, unlike a credit card, a HELOC offers a competitive interest rate that’s typically lower than the rate of a high-interest credit card or a personal loan.

      Why People Use HELOCs

      There’s a lot to consider with a HELOC and how it can help you pursue your financial goals.

      Popular for Home Updates. A HELOC is uniquely suited for remodeling—you’re borrowing on an asset that you’re improving in value. Additionally, since you can spend what you need when you need it, you can pay contractors incrementally as the work gets done. If you experience cost overruns, you’ll likely have the remaining equity to draw on, as well as a long runway to pay it back.

      Mortgage Rates Are Higher Than They Were. If you’re like many homeowners, you refinanced or bought several years ago, when mortgage rates were considerably lower than they are today. As a result, you may be disinclined to move—you’d rather keep your existing low rate. However, if you need more space or would like a different living situation, you can use a HELOC to renovate your current home into your dream home. For some, that’s very appealing.

      HELOCs May Qualify for a Tax Deduction. The rules have changed since the implementation of the 2017 Tax Cuts and Jobs Act. However, if you itemize deductions on your taxes, you can likely deduct the interest on your HELOC, provided you used the loan to make material improvements to the home you live in. Talk with your tax advisor for more details.

      A Secondary Emergency Fund. While it’s no replacement for having six to twelve months of savings in an interest-bearing account, a HELOC can serve as a backstop emergency fund. Because you pay interest only on the funds you use, it can be an effective way to have access to extra funds on short notice, should you need them for a major medical emergency or other disaster.

      Debt Consolidation. A HELOC typically offers a rate lower than high-interest credit card debt or personal loans. This may be the most cost-effective way to begin your process of debt consolidation.

      Major Events. College and weddings don’t come about often, but when they do, they are often expensive. A HELOC may give you access to cash to cover the cost. However, financial experts recommend having a plan for how you’ll pay back the cost of these one-off events before you start to borrow.

      Access to Interim Cash. Let’s say you’re lucky enough to retire at 58 years old, but most of your net worth is in your retirement accounts—which you can’t access without penalty until you turn 59½. A HELOC may be a perfect temporary solution, that you’ll be able to pay back in a few years.

      Wrapping Up: Is a HELOC Right for You?

      Deciding to open HELOC is a personal decision based on your unique financial circumstances. While a HELOC has many benefits, remember that it also requires you to use your home as collateral to secure a line of credit.

      If you have questions, your Old National Private Banker would be happy to help you review your options and talk through your decision-making process.*

       

      *Credit products are offered by Old National Bank, NMLS #459308, Equal Housing Lender. Deposit products are offered by Old National Bank, Member FDIC.

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