Whether you’re coping with sweltering heat and an old, barely functioning air conditioner or you want to upgrade your kitchen, you are facing a significant expense. According to Home Advisor, most people spend just over $20,000 on a kitchen remodel; that air conditioner could cost you up to $9,000 or more as well, depending on the size of your home.
While you might be able to secure a personal loan or put these expenses on a credit card, you have other options. Learning more about how a home equity line of credit works and what you can use it for can help you determine if this product meets your needs when it comes to tackling a large project or coping with an unexpected expense.
HELOC stands for Home Equity Line of Credit; most borrowers use a HELOC for home refurbishment and projects. Since you do not borrow a lump sum all at once, the HELOC functions almost like a credit card. When you have a HELOC, you will get a total line of credit that you can then borrow against as you need to. A home equity line of credit differs from an unsecured credit card in one important way; the HELOC is secured with the equity in your home.
Your HELOC will be for a set time frame (often 10 years) and you can draw on it when you need to. If your home needs a new air conditioner, you want to update your bathrooms or you have another improvement in mind, you can begin without delay, simply by using funds from the HELOC.
If you decide a HELOC is right for you, you can apply with your local branch or online. We’ll work with you to determine if this product is a good match for you. Some considerations include the value of your home, the amount of money you owe on your mortgage and your personal financial outlook. The amount of credit you get will depend on the amount of equity in your home.
The process is faster than a mortgage and upon approval you’ll be able to access the credit line your lender has extended. HELOC terms vary; you may have a minimum or maximum withdrawal to adhere to when you make a purchase. You’ll use the funds in this line of credit when you are ready to launch a project.
During the term of your loan, you’ll pay back the funds you borrow over time. During the borrowing period, you’ll pay only interest, making the payments affordable and accessible. After that time passes, your total repayment plan can range from 10 years or more, and you’ll pay both principal and interest. There is no penalty for paying off this line of credit early, so many borrowers choose to pay the HELOC off as funds are used.
One of the primary advantages of a home equity line of credit is the built-in flexibility; once approved, you can use your HELOC as little or as often as you need to. A few other advantages include:
You can use your HELOC for other things; while most borrowers draw on a home equity line of credit for home projects, they can be used for other purposes. Emergency repairs and other unexpected expenses can easily be dealt with when you have a HELOC in place.
Like any financial instrument, a HELOC can present some risk to borrowers; it is important to have the full picture before determining if a home equity line of credit is right for you. A few things to consider include:
A home equity line of credit can provide you with a convenient source of funds, but does have some potential drawbacks to consider. If you want to learn more about HELOCs, are interested in applying or simply want to see what a home equity line of credit looks like for you, stop by your local branch today or contact us here. We’ll be able to talk about some specifics and give you a good idea of what you can expect from the process.
Topics: Home Ownership
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