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Using Equity to Winterize Your Home

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Winter can be a beautiful time of year … just as long as the winter weather doesn’t invite itself indoors.

Thankfully, there are plenty of ways to protect you and your home from the elements. Some solutions are inexpensive or fall into the DIY category, like weather stripping and caulking. Others, like window or furnace replacement, are beyond the skill set of most homeowners—often exceeding savings account balances as well.

If you have limited savings and your home needs protection, a home equity loan or home equity line of credit (HELOC) may be the answer. Follow these steps to see if a home equity loan or HELOC is right for you.

Take stock

Start by making a list. What areas of your house are drafty? What needs to be replaced? What local resources are available?

A home energy audit is a good way to pinpoint areas to improve your home’s efficiency (and save you a small fortune on your electricity or gas bill). This handy tool can help find an auditor near you. (Some energy service and utility companies will even pick up all or part of the tab.) Or you can do it yourself: Drafty doors and windows can be fixed with the help of a handy friend or a YouTube tutorial. More labor-intensive projects, such as installing storm windows and storm doors, and adding insulation to an attic—particularly if access is tricky—might require a professional.

A home energy audit can improve your home’s efficiency. Some utility companies will pick up all or most of the tab.

Hire a contractor

If you know your heat pump is nearing its end, or the flame in your gas furnace is burning yellow instead of blue, it's time to call a contractor.

To avoid headaches down the road, make sure to research contractors’ backgrounds and reputations before requesting bids. Check government websites that compile licensing and business records, and visit consumer-oriented sites like Angie's List and the Better Business Bureau. As a rule, you should get at least three bids before deciding who to hire. And don’t forget to ask for client references!

As the saying goes, “you get what you pay for.”

“Just because a contractor has the lowest bid does not mean it is the best fit,” said Jessica Fairchild-Clements, Senior Loan Officer at SELCO.

Determine how you’ll pay

If you don't have enough money socked away, consider a home equity line of credit (HELOC) or equity loan. Typically, both loans and HELOCs:

  • Carry lower interest rates than a personal credit card.
  • Are secured by the equity in your home; this means you can qualify for a bigger loan using your home as collateral.
  • Let you deduct interest from your federal income taxes as long as the funds are used for home improvements.

Keep in mind, when setting an interest rate, lenders are likely to weigh the value of your home, how much you still owe, and your overall creditworthiness.

There are significant differences between home equity loans and HELOCs. The common procedure of most home equity loans is to deliver your funds in one lump sum while establishing a fixed interest rate and repayment over a specific period.

A HELOC, on the other hand, is a revolving line of credit, like a credit card. You pull from it as needed, up to a specified amount. HELOCs also come with variable interest rates. You pay only on what you draw, but the rate may increase or decrease. In addition, many HELOCs come with specified draw periods that are followed by repayment periods. One perk of a SELCO HELOC is ease of access to your line of credit. You can seamlessly transfer funds to your checking or savings accounts to make purchases. Or skip that step entirely by using the Home Equity Visa Card, which you can receive in the mail or have one printed at a branch with instant-issue capabilities.

“Having the option to use a Home Equity Visa Card is great when you’re working on some of the smaller winterizing projects yourself,” Fairchild-Clements said. “There’s no need to transfer money around; just use your card to make your purchases.”

Keeping the cold outdoors is a great reason to tackle home winterization projects, but the value you’ll add to your home will be beneficial in all seasons—and for years to come. Staying warm will just be a bonus.

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