If new to exploring credit and loan options, you’re likely wondering if a home equity line of credit, or HELOC, is a good option for you.
You may want to consider a home equity line of credit if you need money for things like home improvements, but don’t want to borrow – and pay interest on — a large sum of money. What sets a HELOC apart from other loans is you only borrow
what you need and pay interest on the amount you use..
Because it is a revolving line of credit secured by your home’s equity, you can benefit from the value of your home right now, instead of waiting for the future to reap the benefits of your long-term investment.
How does a home equity line of credit work?
Do you need a little extra money to remodel your home? Are medical bills piling up? Do you want to consolidate outstanding debt into one lower-interest payment?
A HELOC allows you to use the equity in your home right now, so it helps you when you need it most. If you obtain $30,000 in a home equity line of credit, you could use a few thousand on home improvements and potentially boost your home’s value. It’s your choice — if you meet HELOC requirements, it can be spent on anything.
You could use a HELOC for:
- Home improvements
- A new vehicle
- Medical expenses
- Educational expenses
- Consolidate outstanding debt
- Vacation expenses
It’s up to you to determine your greatest financial needs and how a HELOC can help you reach those goals. Its flexibility and affordability make it one of the best ways to borrow. Often, you can secure a locked interest rate for a home equity line of credit, which helps keep costs manageable. .
How do I get a home equity line of credit, and what are home equity line of credit requirements?
A home equity line of credit provides you with a pre-approved line of credit using the equity of your home, so your home’s value must be higher than the amount you owe on it to qualify.
Expect the application for a HELOC to be similar to the home mortgage approval process — your annual income, debt-to-income ratio and credit score all play important roles. An appraisal determines your home’s equity, another key factor in the process.
Once you’ve reviewed the home equity line of credit requirements and have been approved, it’s a good idea to consult with your tax advisor about potential tax-deductible interest, so you can possibly save even more.
Ready to learn more or apply for a HELOC? Get started today.