Access Equity with a Home Equity Line of Credit
Getting a home equity line of credit (HELOC) is a popular way for homeowners to turn equity into money for various financial needs. Learn why so many are choosing this option…
What is a Home Equity Line of Credit?
A HELOC, sometimes referred to as a “home equity line,” is a loan set up as a line of credit instead of a fixed dollar amount. Fixed dollar agreements are referred to as home equity loans.
You put your home up as collateral, and your lender determines a credit limit based on your equity. Essentially, you can use the line of credit as a credit card to cover your immediate financial needs.
When to Consider a HELOC
You should consider a home equity line instead of a home equity loan if you have intermittent needs. HELOCs allow you to draw funds on an as needed basis, rather than in one lump sum. You pay interest only on the funds that you needed at that moment.
Typically, upfront costs are lower for HELOCs.
For all of the above reasons and more, homeowners use home equity lines for paying down debt, keeping up with their child’s college tuition, or upgrading their property.
Is Now the Right Time?
We may not see interest rates this low again for many years to come. If you’re considering a home equity line of credit or refinancing to take advantage of the still low rates, Trusted House Finance has you covered.
Do I qualify for a home equity line of credit?
It depends. Most lenders require homeowners to maintain at least 10-20% of their equity after taking the new line of credit into account.
To determine how much you can borrow, you should take your current home value and subtract the amount you still owe on your mortgage.
For a home worth $300,000 in which the owner has $200,000 left ot pay on the mortgage, the equity is $100,000 (30% of the home value).
In that example, if the lender demanded the borrower to maintain a minimum of 20% of their home’s value ($60,000 in this case), then the maximum they could borrow would be $40,000 ($100,000 equity minus the $60,000 that must remain).
Minimum HELOCs usually range between $10,000 to $25,000.
Can I get a home equity line of credit with bad credit?
Yes. A HELOC is a way for homeowners with bad credit to be able to get a loan from a reputable lender. Putting up your home as collateral gives lenders the confidence to deliver a line of credit, with reasonable interest rates, despite the fact that you have a low credit score.
Can you use a home equity line of credit to purchase another home?
Yes. Using a HELOC from a primary residence to purchase a second home can sometimes be less expensive, speedier, and easier than using a traditional mortgage loan.
How long does it take to get approved?
If you qualify, you can get a home equity line within 30 to 45 days. That is the amount of time it typically takes for loan underwriters to review and process an application.
Don’t Miss Out
You need to act fast to take advantage of low interest rates.
Trusted House Finance can help you figure out whether or not a home equity line of credit or refinancing can help you reach your financial goals.
Tell us a little bit about your current home loan, and we’ll help you find the lenders offering the best rates right now!
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