One term you've likely heard a number of times in the mortgage world, but may not totally understand how to take advantage of, is equity in a home. Equity is the difference between what you owe on the mortgage and the value of your home on the market, and high equity allows you to do a number of things -- one of which is the home equity line of credit, or HELOC.
At Integrity First Lending, we're here to help with a wide variety of mortgage services, from several origination programs to mortgage refinancing and much more. We'll inform you of all the important factors surrounding home equity, including when it might be a good time to consider a HELOC for your needs. What exactly is a HELOC, how can you find out if you're eligible for one, and when might be some good times to consider utilizing one? Here's a basic primer.
First and foremost, let's define what a HELOC actually is. A HELOC is a loan that's secured by your home equity, which as we stated before is the value of your home minus any outstanding mortgage debt. You can generally borrow up to around 80% of your home's value through a HELOC if you qualify, though this number may differ depending on the lender.
HELOCs act a lot like credit cards in that you're approved for a maximum loan amount, but you're not required to use all of it at once (or at all, for that matter). You can borrow funds as needed and make minimum monthly payments on the outstanding balance, or pay off the HELOC entirely without any penalty.
HELOCs also generally have variable interest rates, meaning that the rate can go up or down over time in response to changes in the market. However, some HELOCs offer a fixed-rate option for a certain period of time (typically 5-10 years), after which the interest rate will revert back to being variable.
Now that we know what a HELOC is, let's look at some of the key benefits:
Now, you must be aware that there are some qualification guidelines for HELOCs, and not everyone necessarily meets them. They include:
Here are some of the most common ways homeowners tend to utilize HELOCs:
HELOCs can be a great financial tool for eligible homeowners, providing them with access to cash when they need it and offering a number of potential benefits. If you think a HELOC might be right for you, be sure to speak with your lender about qualification requirements and compare offers before moving forward. They will explain the underwriting guidelines and help you select the best option.
As you can see, a HELOC can provide you with a lot of flexibility in how you choose to use the funds. But before you apply, make sure you understand the qualification requirements and compare offers from multiple lenders to ensure you're getting the best deal possible.
For more on this, or to learn about any of our home loans or mortgage rates, speak to the team at Integrity First Lending.
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