Tapping your home equity can be a convenient, low-cost way to borrow large sums at favorable interest rates to pay for home repairs or debt consolidation. However, the right type of loan depends on your needs and what you plan to use the money for.

The most common ways to access the equity in your home are a HELOC, a home equity loan and a cash-out refinance. A mortgage lender or your financial institution can help you determine which way makes the most sense for you.

There are several ways to use your home equity. Below are four of the most frequent:

1. Home Improvements

Home improvement projects are one of the most common ways home equity is used. Upgrades can make your home more comfortable and could raise the home’s value. Consider the ROI on your project. For some people, the return on investment isn’t as important if they are planning to stay in the home a while and want a better kitchen for the family to enjoy. But if you are planning to sell within the next five years, you should do your research. Remodeling Magazine’s annual Cost vs. Value Report is a useful tool.

2. Debt Consolidation

If you have high-interest credit card debts, personal loans or car loans, you might consider using a home equity loan or cash-out refinance to pay them off. This essentially rolls those balances into your new loan, typically with a lower interest rate than other lines of credit.

3. Long-Term Investments

Some homeowners choose to use their home equity to invest in the stock market or real estate, typically in a vacation home or rental property. You will want to weigh the rate of return you expect to achieve on a long-term investment versus the interest rate of the mortgage or home equity line of credit.

4. retirement

Equity is a great nest egg. At retirement you can consider selling your home and downsizing, using the profits of your equity to boost your income.

Home equity is also sometimes utilized for other expenses like college costs, emergency expenses, business expenses, or even weddings. Again, you will want to weigh the risks with your lender or financial planner.

If you want to learn more about home equity or are you looking to buy or sell a home, reach out. We can help answer questions and provide a list of lenders other clients have used.