We’re breaking down the most important aspects of a Home Equity Line of Credit.
You’ve all heard of a Home Equity Line of Credit—HELOC for short. But do you really understand who can get a HELOC? What a HELOC is? What can a HELOC be used for? Why choose a HELOC over another form of lending? There are so many questions, but we have answers.
Let’s cover the basics.
We’ll start with the “Who.” Although requirements vary with each lending organization, in order to qualify for a HELOC, you should have equity in your home of at least 15% to 20% of its appraisal value. “Equity” is the amount of your home that you actually own—the difference between the home’s value and the outstanding balance on your mortgage. It’s also very beneficial when applying for a HELOC if you have a good credit score with a favorable debt-to-income ratio.
Now, onto the “What.” A HELOC can be used to cover a variety of expenses to give you better financial flexibility. You can cover anything from tuition expenses to home renovations to your next big vacation. Some people even find it helpful to consolidate high-interest credit card debt using a HELOC.
As for the “Why,” when it comes to lending, there are a lot of options available. The best-fitted lending solution typically depends on the borrower. However, a HELOC is a great option for many reasons. Unlike a personal loan, which is not secured by collateral, a HELOC is a smart way to make your home work for you.
With a HELOC, you’re borrowing against your home’s equity to get a revolving line of credit that can be used at any point while it’s still open. Since the funding has collateral, you can generally obtain larger amounts. Also, the interest rate on a HELOC is usually lower than that of other loan products.
Understanding the ins and outs of a HELOC.
If you’re not sure about the inner workings of a HELOC, you’re not alone. According to an article from The Financial Brand, a survey from TD Bank found that many homeowners who presently hold a HELOC generally do not know how their line of credit works.
Some may not know that certain organizations, like Lake Shore Savings Bank, allow you to pay interest only on the portion of the HELOC that you use. You draw on your HELOC for a certain number of years—at Lake Shore it’s 15. After that period ends, the line will shut down and the loan is amortized for the next 15 years, or until paid in full or refinanced.
Learn more about a HELOC today.
When choosing the perfect lending option, you want to make sure no stone is left unturned. At Lake Shore Savings Bank, lending is one of our specialties, and we’re always here to help.
If you’re ready to explore a HELOC or another lending product, call or stop by your local branch today to chat with one of our experienced on-site loan specialists.