5 Ways Older Homeowners Can Use a Home Equity Line of Credit

One perk of using HELOC funds toward accessibility improvements is that it could qualify you for a tax write-off. As long as you use the funds to “buy, build, or substantially improve” your house, you can deduct the interest you pay on a HELOC from your taxable income.

2. To repair or improve your house

You could also use funds from a HELOC to cover other home improvements and repairs. For example, you might use the money to replace a damaged roof or fix a broken water heater. Home renovations can add value to your home — through a room addition or kitchen remodel, perhaps. “Some also use a HELOC to purchase investment property and remodel those for flips or long-term rental properties,” says Mason Whitehead, branch manager at Churchill Mortgage in Dallas.

3. To pay off higher-interest debts

You might also use HELOCs to pay off other debts. This often makes financial sense because HELOCs typically have lower rates than those offered on other financial products, particularly credit cards (the average credit card interest rate in May 2024 was 21.5 percent).

“HELOC interest rates are typically about half those of credit cards,” says John Aguirre, a loan officer at Loantown in Del Mar, California.

Jon Hill, a 49-year-old wedding officiant at the Dudeist Ministers in Cincinnati, knows this firsthand. Two years ago, he took out a $70,000 HELOC to help pay off his credit card debts. “During COVID I was out of work, so I had run up a lot of debt,” Hill says. “[The HELOC] paid that off.” Hill estimates the move saved him anywhere from 15 to 20 percent on interest costs.

If you’re considering using a HELOC to pay off high-interest credit card debt, make sure you have a plan to avoid racking up credit card debt again in the future. As Whitehead explains: “Remember, 90 percent of money management is behavior. If you have a history of getting into credit card debt, then using a HELOC to pay off that debt likely just means you’ll be in credit card debt again within a few years and have less equity and now a HELOC payment also to balance.”

4. To cover medical debt

You may also want to use a HELOC to pay off existing medical debts you might have. Data published in 2022 from health policy foundation KFF shows that 37 percent of Americans 65 or older currently have or have had medical debt in the last five years. While the majority of those surveyed had less than $5,000 in debt, over 10 percent owed $10,000 or more.

HELOCs can often offer an affordable way to pay these debts down over time, especially compared to medical-specific credit cards. According to a 2023 Consumer Financial Protection Bureau report, these specialty cards are typically more expensive, with interest rates often rising above 25 percent.

5. To provide a financial safety net

A HELOC could also be useful in the event you need to cover unexpected costs from an emergency, such as a car accident or sudden hospitalization.

The good thing about this strategy is that you won’t pay interest on the HELOC until you actually withdraw funds. This is different from a traditional loan, in which you’d start paying interest on the entire loan amount right away.

While reverse mortgages can also serve as a similar safety net, giving you access to regular funds over time, HELOCs are usually the more affordable choice. “HELOCs can be a more cost-effective way to access equity compared to a reverse mortgage, as they typically involve significantly lower fees — often by a factor of at least five to one,” Aguirre says. “Reverse mortgages are much more expensive to obtain.”

Run the numbers

Whatever you use a HELOC for, make sure you have a plan for paying it off, and take the time to do a cost-benefit analysis before moving forward. “You may use [a HELOC] for a family vacation, but then you need to factor in the payments going forward and how long it will take you to pay it off,” Whitehead says. “The cost over time with interest may end up adding way more onto the cost … [making] it not worthwhile.”