A Home Equity Line of Credit (HELOC)
Home equity line of credit
This is an open ended loan that can be paid down or charged up for the term of the loan, much like a credit card. The interest rate fluctuates (typically monthly).
With a HELOC, your lender will approve you for a specific amount of credit - the maximum amount you may borrow at any one time under the plan. In determining your credit limit, your income, debts, credit history and other financial obligations will be reviewed. An appraisal will be required on your home to determine the home's market value. Your credit limit will be based on a percentage of your home's appraised value, which is then subtracted from the balance owed on your existing mortgage.
Most HELOCs have a fixed period (5, 10, even 20 years) during which you can borrow money. Typically, you will use special checks or a credit card to draw on your line. You will be required to make a minimum payment each month – usually the interest that accrued during the draw period. However, the interest you pay is usually tax deductible. At the end of your "draw period," you will be required to pay off the loan, making monthly payments on the principal and interest.
You choose what you want to do with your home equity line of credit:
- Remodel your home
- Take a vacation
- Consolidate bills
- Buy a car, boat or RV
- Finance tuition or other expense
- Use it as an emergency fund
There are many features of HELOC loan programs. Ask your Loan Officer to help you decide which is best for you.
- Great Rates: rates can be below the prime rate on some programs.
- No Loan Fees: No appraisal fee or closing costs.
- Convenient Closings: Some programs allow doc signing in your home.
- Credit lines or maximum loan limits vary with each program.
- Pricing varies with the LTV.
- Accessing the cash in your credit line can be done by writing a check, charging on a credit card or making a withdrawal at a financial center.
- Many of these programs have an early termination fee.
- Some programs may offer a fixed rate loan option feature, where you can lock in a fixed rate on all or a portion of your outstanding balance.
- Pricing is based on your Credit Score. These cutoff limits are fairly strict, so if your score is just below the next higher range, you may want to discuss how to improve your score with your loan officer.
A HELOC is usually 100% tax-deductible*, and a smart way to consolidate debt, pay for home improvements, new automobiles, student loans or even vacations or weddings.
Home Equity Fixed Rate Loan
You may prefer a home equity fixed rate loan compared to a HELOC. Home equity fixed rate loans offer a wide variety of amortization periods (length of time to pay it back), more choices for people with less-than-perfect credit, fixed rates so your rate can never go up and the interest paid may also be tax-deductible*!
* It is recommended that Customers consult their tax advisor. Not all loan fees or interest payments are tax deductible.
Home Mortgages