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5 Tips for Savvy Use of Your Home Equity Line of C

presented by the home income builder

5 Tips for Savvy Use of Your Home Equity Line of Credit

 by: Tim Paul

Tapping your home's equity to pay college expenses, consolidate credit card debt or even to buy a new car or boat is common place. Many economists attribute the additional buying power afforded consumers through home equity debt as a primary reason the nation's economy has been able to emerge from the recent recession. Yet, aside from simply allowing consumers to spendmore, the flexibility and efficiency of a home equity line of credit (HELOC) can provide the financially savvy person with the means to savemoney, make money or simply take advantageof opportune situations he or she might otherwise miss out on.


Here are five tips to show you how:

Tip 1: Take Advantage of Higher Insurance Deductibles! You probably know that raising deductibles on auto and homeowners insurance policies can mean big savings on insurance premiums.
If you increase the deductible on a homeowner's policy from $500 to $1,000, you'll cut your premium by as much as 25%!
Yet many people don't do this because they fear they may not have the necessary cash available in the event of a loss. With low-interest cash readily available through a home equity line of credit you'll have the security and confidence you need to raise your deductibles and reap the savings!

Tip 2: Lock In Big Savings!
Credit card companies (e.g. the GM card) frequently have shopping programs with names like "Main Street Savings" on a 30-day free trial basis.
These programs allow you to buy discounted gift cards (20% discount) for major national retailers like Target, Sears, and Home Depot. The flexibility afforded by a home equity line of credit can allow you to purchase (during the free trial period) a large amount of discounted gift cards for major retailers you frequent.


Then use these cards instead of cash or credit when you purchase everyday items (The cash you would have spent can be used to pay down the HELOC). Although you pay low interest on the home equity credit line, you receive a front-end discount of 20% on everything bought.
When combined with store coupons and sales, you can realize total savings of 70% or more!
In short, a HELOC provides the low interest cash availability to take advantage of bargains like this that you might otherwise have to pass on.

Tip 3: Take Advantage of 0% Balance Transfer Offers! We've all seen no-fee credit card offering "0% APR" on balance transfers for 6, 12, and even 18 months.

If you have a balance on your HELOC, you may be able to take advantage of these offers. Here's an example of how: last year I accepted such an offer and promptly transferred $10,000 from my home equity credit line balance (which had a 4.
25% rate).


Then I cut up the card! For the next eleven months, I paid the monthly minimum credit card payment (3% of the outstanding balance) by writing a check from my home equity line of credit. In the twelfth month, prior to the expiration of the 0% offer, I paid off the remaining balance with another home equity credit line check.
During the 12 months, I also made sure to continue my regular payment towards the HELOC at the same level, meaning that more of each went to pay down principal and less went to interest.
Net result: interest savings of over $350.00, lower principal balance on my HELOC, and a positive addition to my credit repayment history!

Tip 4: First Pay With a Rewards Credit Card! If you're contemplating using your HELOC for a major purchase, you should consider whether or not the merchant your dealing with accepts credit cards. Why? Because it makes a great deal of sense to pay first with a rewards credit card and then pay off the card with your HELOC check. On a recent $14,000 bathroom remodel, I was able to charge plumbing services, cabinets, and almost everything else to my Fidelity/MBNA 529 College Rewards Mastercard.

This card pays you back by putting 2% of everything charged into a 529 college savings plan.
Result: $280.00 in college savings that would have been missed if I paid the bills directly with home equity credit line checks! Whatever rewards credit card you favor, it's sensible to pay first with the card whenever possible.
Keep in mind, though, you must promptly pay off the balance and not incur finance charges.

Tip 5: Replace Your 1st Mortgage with a HELOC! According to Money Magazine, if you have more equity than debt and plan to stay in your home for 3 years or less, you should consider replacing your first mortgage with a home equity line of credit.

HELOCs are currently available around the country at rates of 4% or lower. Even if rates increase a full percentage point each year, they'll still be low when you pay off the loan.

Best of all, there are no closing costs with most HELOCS so you won't have to worry about recouping them through interest savings as you do with a traditional mortgage refinance.

A savvy person - using tip 3 in conjunction with tip 5 - might even move a portion of his mortgage to a 0% credit card thanks to the flexibility of a home equity line of credit.

About The Author

Tim Paul has more than 25 years executive financial management experience. His recent area of focus has been to develop and catalog proven strategies for financially savvy persons to get the most from their home equity credit lines.
His website is www.


sagetips.com.


mail@sagetips.com

.