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A HELOC (Home Equity Line of Credit) is a type of credit line which uses your home as collateral. Obtaining a HELOC can be beneficial because you can tap into the equity of your home to pay for major expenses such as home improvements, college tuitions, etc. Using a HELOC for miscellaneous purchases such as vacations, and cars is not what this product is designed for. Many lenders will set a limit for the line of credit by taking a percentage of the homes appraised value and subtracting it from the existing mortgage balance as the lender needs to still have equity in the home to collateralize the credit line. |
HELOC’s operate much like a credit card as there is a predetermined credit line that cannot be exceeded and a minimum monthly payment is based on the amount of the credit line used. It’s a smart idea to apply for and obtain a HELOC to be used in the future as rates in this market tend to fluctuate.
Reasons to consider applying for a Home Equity Line of Credit:
- HELOC’s are great to consolidate consumer debt as credit card rates are generally higher and can be paid of using a lower-interest home equity line of credit.
- If used for home improvement purposes, interest paid can be tax-deductable.
- HELOC’s can be used as an emergency line of credit to be used for medical bills, college tuition, etc.
- Can be used as a down payment source to finance additional properties or other investments.
HELOC’s are a power mortgage product that borrowers should consider utilizing or at the very least inquiring about when shopping for a mortgage or refinancing an existing loan.
