How You Can Use the Financial Resource Built Into Your Home to Help With Your Long-Term Goals

Homeowners are increasingly using their home equity, through products like HELOCs and home equity loans, as a financial resource for managing debt, funding renovations and more. When you purchase through links on our site, we may earn an affiliate commission. Here’s how it works. Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.You are now subscribedYour newsletter sign-up was successfulWant to add more newsletters?Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. 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In these complex times of economic and interest rate uncertainty, many homeowners are choosing to stay put through it all.Some are strategically holding on to a low mortgage rate in an unpredictable market. Others are prioritizing stability, maintaining their sense of control while the economic pendulum swings.But staying in place doesn't mean standing still. A growing number of Americans are tapping into one of the most powerful yet underutilized assets they own — home equity. At the same time, many homeowners may not fully understand the tools available to them.Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special IssuesProfit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.Profit and prosper with the best of expert advice - straight to your e-mail.According to a recent survey from TD Bank, 30% of homeowners can't correctly identify what a home equity line of credit (HELOC) is, and 34% can't define a home equity loan.A HELOC is a line of credit that lets one borrow money using the available equity in one's home as collateral. It offers the flexibility associated with a line, allowing the borrower to draw and repay funds as needed.Rates are typically lower than other forms of credit, such as credit cards and are variable tied to the Wall Street Journal Prime Rate plus or minus a margin. Once utilized, many HELOCs allow for the balance to be moved to a fixed rate, with a set repayment term and monthly payment.About Adviser IntelThe author of this article is a participant in Kiplinger's Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.By contrast, a home equity loan provides a single lump sum amount, also secured by the home. Home equity loans typically have a fixed rate and term from the start, giving homeowners consistent and predictable monthly payments.The current lack of awareness represents a potential missed opportunity. When used responsibly, home equity can serve as an adaptable financial resource, a strategic debt management tool and can even be an investment in the future.When homeowners understand how to make their equity work for them, they can make confident choices that align with their financial goals.American households have been under sustained financial pressures, which have only amplified over time. Inflation, interest-rate volatility and lingering debt burdens have left many families searching for ways to create financial breathing room, and home equity products have emerged as potential solutions.In fact, 86% of homeowners who use home equity products, such as HELOCs and home equity loans, consider them an important part of their financial plan.Unlike higher-interest forms of borrowing, these products allow homeowners to access the value they've built in their homes, providing a cushion that can be used for major expenses, renovations, unexpected emergencies or other financial needs.In an environment in which cash-flow flexibility can matter as much as long-term savings, this option might make sense for homeowners.When used as one piece of a broader financial plan, it can provide both stability and opportunity, two qualities that are often in short supply when markets are uncertain.While home equity products can help homeowners with one-time expenses, they're also proving valuable as a tool for long-term debt management amid higher interest rates. For context, according to Experian, the average nonmortgage debt balance in 2024 was $23,066.To manage these debts and ease the pressure, homeowners might consider consolidating their debt into a single loan with a lower rate, without realizing their home equity could help make that possible.HELOCs and home-equity loans allow homeowners to consolidate multiple high-interest debts into a single, lower-rate payment. This can free cash for savings, investments or other priorities, transforming home equity from a static asset into an active part of a financial toolkit.With home equity loans' fixed rates and defined repayment terms, homeowners have the clarity to plan around consistent monthly payments. That can make it easier to build a realistic budget and stay on track to pay off debts within a set time frame.Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel, our free, twice-weekly newsletter.Beyond serving as a financial safety net or debt-management tool, home equity products can also empower homeowners to invest in their futures. For many households, the home represents their primary asset; responsible access to this asset is of paramount importance.Tapping into that equity can be an affordable way to maintain and protect a property's value, whether that means replacing an aging roof, upgrading outdated appliances or remodeling a kitchen or bathroom. These kinds of investments tend to pay off over time, improving homeowners' daily lives while helping their home hold or increase in value.Knowing that they can proactively improve their financial standing, rather than being beholden to market conditions, can give homeowners a tangible sense of progress and confidence in their broader financial goals.As markets continue to evolve, more homeowners are recognizing that they don't need to look beyond their front doors to find financial flexibility. With the right strategy, the equity they've already built can become one of the most powerful tools for navigating whatever comes next.This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.Jon Giles is the Head of Residential Lending Strategy and Support for TD Bank. Based in Charlotte, North Carolina, Jon has U.S. footprint-wide accountability for the RESL Consumer Direct model, focused on originations of mortgage and home equity products through the retail store, online and phone channels. In addition, he has responsibility for all home equity product management, residential lending marketing strategies and fair lending oversight and performance. Starting July 1, federal borrowing will be capped for new graduate students, making scholarships and other forms of "free money" vital. Here's what to know. Retirement Even modest changes in retirement income can raise Medicare premiums under IRMAA. Here’s how even a small increase can affect your retirement costs. Teaching your kids to invest early will help them build a solid financial future. Here are five ways to get them started. 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