When should I use my home equity?

Your home has probably done a lot for you over the years. It’s where you’ve made memories, celebrated milestones, and planted roots.

But as values rise, many homeowners are discovering it can give something more practical back: equity you can use to pay down debt, cover major expenses, or invest in the future.

But knowing when to tap into it and when to hold off is key. In this guide, we’ll break down what home equity is, how it works, and the smartest (and not-so-smart) times to use it.

Home equity is the portion of your home you truly own. It’s calculated by subtracting what you still owe on your mortgage from your home’s current market value.

Think of it like a savings account built into your house. Every mortgage payment adds to it, and rising property values give it an extra boost.

Timing matters. While there’s no one-size-fits-all answer, here are a few signs it could be the right moment:

Build at least 20% equity

The more equity you have, the more you can borrow, and the better your loan options may be.

Plan to stay put

If you’ll be in your home for at least a few more years, you’ll have time to rebuild equity and benefit from the loan.

Have a clear purpose

Whether it’s consolidating debt, remodeling a bathroom, or helping a child with college costs, know exactly what you’ll use the funds for and how you’ll repay them.

Maintain a strong financial picture

Lenders review your credit score, income, debt-to-income ratio, and repayment ability. The stronger these are, the more likely you’ll qualify for favorable terms. Even if they aren’t perfect, you may still have options.

Taking equity out can be a powerful strategy, as long as it supports your bigger financial goals and you have a clear plan for repayment.

You can access your home’s value without changing your first mortgage by taking out a HELOC or HELOAN.

A Home Equity Line of Credit (HELOC*) works like a credit card you can borrow from. You can tap into those funds as needed during the draw period, and only pay interest during this time. You’ll pay back the interest and principal during the repayment period.

A Home Equity Loan (HELOAN) gives you a lump sum of all your usable funds to meet real needs. You’ll begin repaying both principal and interest immediately.

Using your home equity can be a smart move when it supports long-term goals or helps you save money in the bigger picture. Here are some of the most common purposes for using home equity:

Upgrade your home

Remodel the kitchen, replace an old HVAC, or add solar panels. If the project increases your home’s value, equity can be a practical way to fund it, especially with a fixed-rate HELOAN that provides upfront cash for larger jobs.

Consolidate high-interest debt

Rolling credit card balances or personal loans into a lower-rate HELOAN can simplify payments and potentially save you thousands in interest over time.

Pay for education

Tuition is a major investment. Using equity to help cover costs may be more affordable than private student loans, as long as you have a clear repayment plan.

Cover medical expenses

Medical bills can be overwhelming. A home equity loan or line of credit may help you cover what insurance does not and keep you from turning to high-interest credit cards.

Prepare for uncertainty

If your income takes a temporary dip, a HELOC offers flexibility. You can draw only what you need, when you need it, which makes it useful as a financial safety net.

Strengthen your financial position

Lenders typically provide better terms when you have at least 20 percent equity in your home, along with good credit and steady income. Meeting these benchmarks makes borrowing safer and more affordable.

Your home isn’t just where you live. It’s also a powerful financial asset. With the right approach, it can help fund renovations, education, emergencies, and more.

Download our Home Equity Guide to see what’s possible. Then talk with a local Guild loan officer to find out whether a HELOC or HELOAN fits your goals.

You’ve worked hard to build equity. Now let’s make sure it works just as hard for you.