Existing home owners, start here to get the facts.
There are pros and cons to any lending product, but for existing home owners, a home equity line of credit could be a smart choice if you’re cash-strapped and in need of, say, home improvements or just want to consolidate high-interest debt.
A home equity line of credit, or HELOC, is when a flexible loan amount is taken from the equity you’ve already gained in your home during mortgage repayment. The more you’ve already paid off generally refers to the dollar figure available to you to borrow against.
We’ve outlined the top benefits below to give you an idea if a HELOC is right for you. It is helpful to know the cons of course too, which range from variable interest rates that could rise (or fall) with the market, to foreclosure on your home, should you fall delinquent on the HELOC’s repayment.
But in many cases, these risks can be avoided. If you are a home owner in good credit standing and have the usual verified income to satisfy repayment, a HELOC is a smart possibility.
Take a look to see how the benefits resonate with your lending needs, then check out our mortgage calculator to get a sense of how much you can borrow.
- Home Improvements
Maybe more than any other reason, a HELOC is a great way to pay for needed home improvement costs, because the improvement adds immediate value to your home–-the very thing you’re using as equity. From a living standpoint, home improvements change your quality of life at home too, giving you more comfort in the important place you spend so much of your time building memories with family, neighbors and friends. A HELOC is a good way to create the space of your dreams without taking out high-interest loans. Plus, home improvements are tax-deductible, meaning you can list the money you use toward repairs or renovations––up to $100,000––on your filing with the IRS.
- Lower Fees
Closing costs are usually low on HELOCs, or Xceed may waive them entirely should your credit score be in firm enough standing. But one thing is for sure for any HELOC borrower, and that is low interest rates. Home owners will find rates are far better than fixed loans, or credit cards, for example, that can have an average 10 percentage points higher in interest than the average home equity line of credit APR. These are number you can’t bargain with, even should your decided- upon rate fall on the higher end of the spectrum.
- Financial Flexibility
HELOCs offer extraordinary flexibility. There’s no restriction on how you use the funds, so while many are used for home improvements (for the tax benefits we mentioned above) you are free to use the money any way you like without justifying how–-an uncommon trait in other loan terms.And you can also borrow just what you need. With a HELOC, there’s no lump sum distributed like personal loans or home equity loans. It feels less risky when you take out only the exact dollar amount you need at the time, rather than a set (and often substantial) amount.There’s a flexibility to a HELOC in this way that other lending options just can’t match–– especially when you stack it against the option of a credit card, that can have a very high APR.And when it finally comes to repayment, HELOCs can be advantageous too. You could have much smaller monthly payments should you borrow less than you originally expected, which is not an uncommon possibility when you’re not locked into a set amount. More basic than that, HELOCs typically have more flexible repayment options than a traditional loan. Depending on your qualifications, a repayment period can be as long as 10 years, or there may be the option to make interest-only payments to start.
Consult our mortgage calculator to get an idea of what your repayment could be, and reach out to directly to learn more about how Xceed can help you on your financial journey.