What is a Home Equity Line of Credit (HELOC)?
A home equity lines of credit (HELOC) is an option available to home owners that allows them to leverage the equity they have built up in their homes. When you apply for this type of loan, you can choose to receive a lump sum of cash to use as you please (Full amount or partial), or borrow the sum over time to use as you please.
Interest rates for HELOC’s are typically higher than first mortgages, are usually variable rate, and the loan remains open the entire time you own the home. If you sell the home the HELOC will have to be paid in full, or your first mortgage will need to be refinanced to include the HELOC amount.
HELOC’s allow home owners to leave their existing first mortgage as it is, while still borrowing more equity from their home. It can be used for many reasons, whether you are consolidating high interest debt, borrowing for a downpayment on a second property, for large purchases, or for cash flow, it is solely at the discretion of the home owner.
Another benefit of a HELOC a lot of people don’t know about is that you can turn a specific portion of the loan into a mini mortgage.
Example; you are borrow from your HELOC to purchase a car, you can borrow the, lets say, $50,000 and lock that portion in! Therefore setting a specific rate, term, and amortization, creating your own mini mortgage for that amount.
Although HELOC’s are a great product, they aren’t for everyone, and you should always speak with your Mortgage Agent prior to obtaining any home financing to see what option is financially best for you!
If you are interested in learning more about HELOC’s or any other home financing product, contact me any time, I’m here to help!