Your home may be more than a place to live — the equity you’ve built can also be a financial tool.

How to Use Your Home Equity to Lower Monthly Expenses

Your home may be more than a place to live — the equity you’ve built can also be a financial tool.

Here’s a real-world example.

A homeowner had a 4.75% first mortgage they wanted to keep, but had accumulated about $90,000 in credit cards and other loans with interest rates ranging from approximately 17% to 24.99%.

Those debts required about $2,100 per month in payments, not including car payments.

Using the Equity Instead

Rather than refinancing the entire first mortgage, the homeowner could use a $98,000 HELOC, including estimated closing costs, while leaving the 4.75% mortgage untouched.

At a current rate of 7.675%, the estimated interest-only payment during the 60-month draw period would be about $627 per month.

Current debt payments: ~$2,100/month
Estimated HELOC payment: ~$627/month
Potential monthly cash-flow improvement: ~$1,473

That’s roughly $17,700 per year of additional breathing room in the monthly budget.

Your Equity Should Have a Strategy

Home equity can potentially be used to consolidate higher-interest debt, improve monthly cash flow, fund improvements or help with your next real estate purchase.

The key is not simply borrowing against your house. It’s understanding whether using your equity actually improves your overall financial position.

Have equity but feel squeezed by monthly payments?

Ask Ed to Run the Numbers →

Illustrative example only. HELOC rates may be variable and can change. Actual rates, payments, closing costs and qualifications vary. Using home equity to consolidate unsecured debt converts that debt into debt secured by your home and may extend the repayment period.