A home equity line of credit or HELOC is the best way to get cash for your needs, whether you’re trying to consolidate debts like medical or major bills like credit cards, or want to work in your home. In recent years this type of loan has declined, but recently lenders are seeing an increase in HELOC applications from lenders. For people who own their own home and are trying to restructure their finances, a HELOC would be an excellent option. The following is what you should know before considering a HELOC.
What is a HELOC?
HELOCs are similar to taking out a second mortgage on your home, but you don’t need to have an existing first mortgage to get a HELOC; a HELOC can be a first or second mortgage. If you want to have access to the necessary funds and save money without having to rely on expensive credit cards, a HELOC is the perfect way. If you want a HELOC, simply fill out an application with the lender of your choice, use your home equity as collateral, and the lender approves the loan for a certain amount. But, a HELOC is different from a traditional mortgage in that the lender will not advance the full loan amount when the loan is made. It works similar to a credit card, in that you can take advances on the loan when you need funds.
Typically, you would do this with checks that you will write out to yourself and deposit with your bank. By doing this, the amount of the check is added to the amount of your loan. HELOCs are like a traditional mortgage in that you must make monthly payments on the loan. Your lender will give you between five and ten years to retire the loan, during which time you will only have to pay interest on a monthly basis. Interest payments will fluctuate and depend on various factors. Once the draw period is over, you must repay the loan in full with monthly payments. The lender generally gives you ten to twenty years to pay off the loan. HELOCs are great for paying big bills and unexpected expenses.
Credit Union Dual Rate HELOC
As mentioned above, HELOC interest rates are calculated every day and will fluctuate based on many factors. Some banks give you access to a double rate HELOC loan. This loan will guarantee an interest rate that is fixed at just 2% for the first two years you have the loan. This introductory rate period will end and standard low interest rates will apply. Many banks charge high interest rates and many fees with HELOC products, while some banks have low interest rates and no closing costs on HELOCs up to $100,000. Some banks offer fast approvals, some in a matter of minutes.
HELOCs are a great option for getting the cash you need at a rate you can afford. For homeowners who need funds to update their home, pay medical bills, make home repairs, or pay for college expenses, call your local credit union today and find out how they can help you reach your goals. . Be sure to speak with a mortgage specialist in person to learn about all of your loan options.