Part of building wealth involves being creative and having the willingness to become a good steward of your money. This can involve a multitude of strategies and tools, often used in unconventional ways. Whether your goal is to pay off debt or grow your investment portfolio, creativity is key!
One financial product that we have used in a non-traditional way is a HELOC. A HELOC, or home equity line of credit, is a banking product that allows a homeowner to access an amount of cash based on the amount of equity in their primary residence. Please note, this is a different product than a home equity loan. If you intend to pursue the strategies outlined in this post, please be sure you are using a home equity line of credit.
A HELOC is intended for homeowners to make improvements to their residence. However, there are few limits to how the line of credit can be used. We honestly believe the HELOC is a great banking product. It’s accessible to many people; as long as you own some equity in your home, this is a product you can use. Additionally, the HELOC is a revolving line of credit. This means it works similarly to a credit card—it can be used over and over to help you reach your goals.
Here are two creative ways we’ve used our HELOC to reach our financial goals!
Purchase a rental property. Because a HELOC grants you access to approximately 80% of the equity in your home, this typically is enough funds to purchase a low cost rental property. This is a perfect example of using leverage to your advantage, and creatively growing your portfolio. To hear more about our experience using a HELOC to purchase rental real estate, check out episode 291 of the Investing in Real Estate Podcast!
Pay off a mortgage. This one is a bit of an advanced strategy, but if you’re dedicated, it can be a great way to save thousands of dollars of interest. Because your mortgage is amortized, paying it down with simple interest via your HELOC can be a wise money move! The great thing about this strategy is it doesn’t take much to get started. We’ve written an entire book on this strategy. You can also learn more by tuning into this episode of the podcast.
Want to learn more about being creative with your money? Last week we launched the Financial Freedom Academy, an online course designed to help you change the way you think about finances, build your net worth, and achieve your own unique goals. Check out the course here.