A Home Equity Line of Credit also referred to as a HELOC allows you to convert your home’s equity into a line of credit that can be used as needed for ongoing expenses — Since a HELOC is a separate loan, you can keep the great low rate you already have on your mortgage loan!
Having a HELOC1 is great for emergencies because you have a safety net for unexpected expenses. A HELOC can even save you money since the rate is lower than most credit cards.
- Great for ongoing expenses like remodeling your home, paying for college tuition, and handling unexpected expenses
- Offers flexibility, only use as needed
- Payments vary and are on amount drawn and a variable interest rate
- 5-year draw period and 15-year repayment period
- Borrow up to 80% of your home’s appraised value
- No annual fee
- Interest may be tax deductible. Consult a tax advisor for details.
How does a HELOC work?
A HELOC works similar to a credit card that allows you to borrow against your available limit as often as needed. Additionally, a HELOC gives you the flexibility to borrow against your home’s equity.
For example, say you have a home worth $300,000 with a balance of $150,000 on your first mortgage and you want to access up to 80% of your home’s value (based on Combined Loan To Value – CLTV) stats. You can establish a HELOC with up to a $90,000 limit:
- Home Value at $300,000 x 80% = $240,000.
- 80% minus what you owe is $240,000 – $150,000 = $90,000.
- $90,000 would be the amount you could use, for this 80% CLTV example.
What can I use a HELOC for?
Once you qualify for a certain limit and your loan is closed, you can use the funds for things such as: home improvement, debt consolidation, medical bills, education and even a vacation.
All you have to do to access the funds is transfer the funds to an affiliate account or come to a branch.
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