6 Best Ways to Use the Equity in Your Home

June 19, 2020

Reviewed By: Amplify

From the moment you finalize your closing costs, you begin to build equity in your home. Each payment you make decreases the gap between what you owe and what your home is worth. As your local real estate market evolves, the value of your home may grow, further increasing your home’s equity.

And having equity in your home can be very beneficial, especially when significant expenses are looming on the horizon. In this article, we’ll discuss the benefits of a home equity loan and discuss the five best ways to use the equity in your home to tackle some of your biggest goals.

What is a Home Equity Loan?

A financial institution can provide you with a loan based on how much equity you have in your home. You receive it in a lump sum and pay it off over time with a standard loan repayment plan. This is considered a secured loan, as your home is used as collateral on your loan amount.

So should you use a home equity loan to tap into your home’s value? As always, the answer depends on your current financial situation and your longterm goals. It is never a bad idea to discuss upcoming loans with a financial advisor.

But if the math checks out, there are many circumstances where a home equity loan might make a big difference when faced with an upcoming expense. Below are six of the most common uses of home equity loans, from home improvements to medical bills.

Paying Off Home Improvements

Home improvements can range from necessary repairs to strictly aesthetic changes. Home equity can be an option for financing any home renovation project. Whether you want a new roof, a pool in the backyard, or upgraded energy-efficient appliances, getting a home equity loan might be the perfect way to have your house pay for itself.

And with some home improvement projects, you might end up increasing the value of your home in the process. According to Bankrate, the list of home improvement projects with the highest rate of return includes:

  • Garage door replacements
  • Manufactured stone veneers
  • Minor kitchen remodels
  • Wood deck additions
  • Siding replacements

If you are smart about your home improvements – if you choose projects that make your home more enjoyable now and more lucrative later – then a home equity loan could be a win-win proposition.

Education Expenses

Paying college tuition bills can add up. According to U.S. News, the average tuition cost for the 2019-2020 academic year was $10,116 for in-state public schools and a whopping $36,801 for private schools. Even with the right grades and a healthy dose of financial aid, it may be difficult for families to afford that dream school. This does not also include additional expenses like books, meals, and campus housing.

While a home equity loan should never be your first option when it comes to college expenses, for many families, these loans can provide a much-needed bridge for student loans.

In Case of Emergency

Emergencies are unpredictable and can happen to anyone. Having equity in your home can provide peace of mind knowing that you have a backup plan for unexpected expenses. Securing a home equity loan can be relatively fast, allowing your family to respond to any emergency needs quickly.

In other words, when you face unexpected medical or legal bills, your home can serve as a financial safety net. The security of a low, fixed interest rate and set monthly payments can also help you avoid less reliable lenders that might take advantage of you during difficult times.

Retirement Income

Retiring requires smart financial planning and spending. Having more than one income source can help retirees enjoy this time of their life to the fullest. Many people at retirement age are living in homes in which they have a large amount of equity. This equity can be used to pay for living expenses throughout retirement instead of being tied up in the house.

Paying Off Other Bills

It can seem counterintuitive to get a loan to pay off other loans or bills, but sometimes it does make sense. Depending on other factors – such as your credit score and credit history – home equity loans have the potential to come in at a much lower interest rate than the standard credit card or personal loan.

In this scenario, your first step should be to do a little research. Use interest rate calculators – such as the Amplify Credit Union “Debt Consolidation Calculator” – to compare your current loans against a potential home equity loan. You may be surprised at how long-term money you might save.

New Investment Opportunities

Finally, equity can be taken out of your home and used for purposes like investing in the stock market or investing in starting a new business. Use caution when considering home equity for this type of goal, however. Investing in the stock market carries risks. Be sure not to overextend so that you can pay the loan back on time.


One of the most significant benefits of being a homeowner is having a reliable source of equity. The scenarios listed above are great examples of times when it might make sense to take out a home equity loan. As always, though, talk to your financial advisor and discuss what options make the most sense for you and your family.

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