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HELOC – Equity Line
Selling your home for a profit can mean a substantial windfall. But in the meantime, while you’re living there, that gain is locked up, out of reach — unless you access the equity with a home equity loan or a home equity line of credit, known as a HELOC.
HELOC vs Home Equity Loan
About Home Equity Lines of Credit
HELOCs and home equity loans are similar in that you’re borrowing against your home equity. But a loan typically gives you a sum of money all at once, while a HELOC is similar to a credit card: You have a certain amount of money available to borrow and pay back, but you can take what you need as you need it. You’ll pay interest only on the amount you draw.
HELOCs often begin with a lower interest rate than home equity loans but the rate is adjustable, or variable, which means it rises or falls according to the movements of a benchmark. That means your monthly payment can rise or fall, too.
“HELOCs often begin with a lower interest rate than home equity loans, but the rate is adjustable. That means your monthly payment can rise or fall.”
Many lenders will let you carve out a portion of what you owe on your HELOC and convert it to a fixed rate. You’ll still have the balance of your line of credit to draw from at a variable rate.
HOME EQUITY LINES OF CREDIT PROS AND CONS
- Pro: Pay interest compounded only on the amount you draw, not the total equity available in your credit line.
- Pro: May offer the flexibility of interest-only payments during the draw period.
- Con: Rising interest rates can increase your payment.
- Con: Without discipline, you might overspend, tapping out the equity in your home and finding yourself saddled with large principal and interest payments during the repayment period.
- Terms and characteristics of home equity loans and lines of credit vary from one lender to another. Be sure you understand the repayment terms of your loan before you commit to a lender, and don’t be afraid to shop around before you sign on the dotted line.
HOME EQUITY LOANS PROS AND CONS
- Pro: A fixed interest rate.
- Pro: Monthly payments won’t change and are for a set period.
- Con: Tapping all the equity in your home in one fell swoop can work against you if property values in your area decline.
What could you do with a HELOC?
Emergency funds
An emergency fund isn’t always ready just when you need it. With a HELOC, feel prepared for whatever comes your way knowing you have access to available funds at competitive rates and flexible terms.
Debt consolidation
If debt management has become a burden, consider using a HELOC to consolidate your debt into a single, more manageable payment at a competitive rate.
Major purchases
A HELOC may give you the resources you need to help you make it happen, at a rate you can feel good about.
At National Escrow and Title:
We can:
- Assist you with finding a lender that offer a HELOC or comparative option.
- Assist the lender with insuring the HELOC or Mortgage Note placed on the home/property.
- Assist with closing documents and signing of the HELOC or Mortgage Note.
No matter what type of loan you are attempting to acquire or if you simply need to know the value of your home or property should you decide to list it our team can help you.
