Home Equity Line of Credit (HELOC)
HELOCs are lines of credit that allow homeowners to borrow money against the equity of their house. What does that mean? It means that you can tap into the value of your house without selling and still get money or payments from your house rather than making the payments.
Intro to HELOCs
Loan Vault knows certain mortgages can be tricky, and second mortgages and HELOCs are often the trickiest. When is it beneficial to take out money to save and make money, and when will that actually lose you money in the long run? Don’t stress about finding and trying to understand the answers online, call one of our trusted Loan Officers who will walk you through the pros and cons to see if this is a great option for you, or steer you towards the right one if not. We have your back.
What is a HELOC?
A HELOC is a second mortgage that allows you to borrow large sums of money by using your house as a line of credit. These mortgages begin with an appraiser coming to appraise your home, which presents an up front cost on the shoulders of the lendee. The lendee then received the appraisal of their house, and this value is used to allow for them to receive a loan against the value of their house, thus resulting in the allowance for large sums of money. This money is tied up in your house, so the collateral is that your house is the asset that is being tied to the lenders if you fail to make a payment. These loans come with two periods, the draw period where you take out cash and make payments only on interest, and the repayment period, where you then make principal and interest payments.
These repayments can stack up very quickly and are often the biggest disadvantage to a HELOC. Be sure to talk to one of our trusted Loan Officers to ensure the use of the loan will offset these repayments and make for the best financial decision for your financial future.
A HELOC has:
- The ability to borrow large sums of money
- No specification on what that money is used for
- Benefits when trying to consolidate debt at low interest rates
Is a HELOC Right For You?
Requirements to keep in mind when considering a Home Equity Line of Credit:
- Credit scores over 700
- You must hold at least 15-20% equity in your home
- Proof of reliable income
- Low debt-to-income ratios