What is a HELOC and how exactly is it useful? Today we’re covering the basics of a home equity line of credit, so read on for more details and see if it can work for you.
With a HELOC, you borrow against the available equity in your home and the house is used as collateral for the line of credit. As you repay the outstanding balance, the amount of available credit is replenished, much like a credit card. This means you can borrow against it again if you need to, and you can borrow as little or as much as you need throughout your draw period up to the credit limit you establish at closing. At the end of the draw period, the repayment period will begin.
To qualify for a home equity line of credit, you need to have available equity in your home, meaning that the amount you owe on your home must be less than the value of your home. You can typically borrow up to 85% of the value of your home minus the amount you owe. In addition, a Mortgage Consultant will also look at the other things they did when you apply for a mortgage: employment history, credit history, monthly income, etc
Lastly, there are two different types of HELOC’s: variable & fixed interest rate. These are quite self explanatory, but the rest of this information can be tricky; speak with your Mortgage Consultant today if you’re interested in discovering your options!