Mortgage Blog

All About HELOC

March 28, 2024 | Posted by: Sarabjit Dhuna

HELOC (Home equity line of credit) is revolving secured loan using your home as collateral. HELOC is usually use for debt consolidation, home renovation and emergency funds. HELOC is good compared to credit cards and personal loans because it can provide lower interest rates.

There are two types of HELOC

1)     Combined mortgage and HELOC : most of the financial institution offers this HELOC as Combination of Fixed rate mortgage and HELOC

2)     Stand Alone HELOC: - this is independent HELOC unrelated to mortgage.

How Much can I borrow with HELOC?

Borrowers usually access up to 80 to 85% of the value of their home. Your home act security for the equity you borrow.

How Can i Qualify: -

Most of the lenders requires that you need to have minimum 20% equity at your home

You need to have required documents such as

• Proof of homeownership
• Credit score
• Current value of your home

HELOC interest rate and Fees

Interest rate of the HELOC is variable interest rate.

Fees are varied as per different lenders

Legal fees
Title fees
Home valuation or appraisal fees
Title insurance fees

• Advantages of the HELOC

• Lower Interest rate compared to credit cards and personal loans
• You can easily access money for various reasons like home improvement and debt consolidation etc
• You can get tax-deductible benefits with HELOC
• There are no prepayment penalties with HELOC

 Disadvantages of HELOC

• HELOC Features Variable Interest rate so, sometimes variable rate can fluctuate as per market
• If you missed payment then your credit score can get decrease, also have risk of losing home to lender
• Lender can demand any time that you pay full loan amount
• Lender can also reduce credit limits anytime as well.

If you have any questions regarding HELOC then reach out to me Sarabjit. You can also calculate mortgage with our mortgage Calculator. You can also check out other mortgage blogs in our site.

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