Home Equity line of Credit
Applying for a Home Equity Line of Credit loan might Be Simpler Than You Think
- $5,000 to $350,000 with a maximum CLTV of 89.99%
- >$350,000 to $500,000 with a maximum CLTV of 85%
- 30 year term: first 10 years interest only draw period/20 year repay period.
- No early termination fee.
- No draw required at closing.
- $75.00 annual maintenance fee.
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A home equity line of credit, also known as a HELOC, is a line of credit secured by your home that gives you a revolving credit line to use for large expenses or to consolidate higher-interest rate debt on other loans such as credit cards. A HELOC often has a lower interest rate than some other common types of loans, and the interest may be tax deductible. Please consult your tax advisor regarding interest deductibility as tax rules may have changed.
How a HELOC works
With a HELOC, you’re borrowing against the available equity in your home and the house is used as collateral for the line of credit. As you repay your 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 (typically 10 years) up to the credit limit you establish at closing. At the end of the draw period, the repayment period (typically 20 years) begins.
Variable interest rate
When you have a variable interest rate on your home equity line of credit, the rate can change from month to month. The variable rate is calculated from both an index and a margin.
An index is a financial indicator used by banks to set rates on many consumer loan products. Most banks use the U.S. Prime Rate as published in The Wall Street Journal as the index for HELOCs. The index, and consequently the HELOC interest rate, can move up or down.
The other component of a variable interest rate is a margin, which is added to the index. The margin is constant throughout the life of the line of credit.
As you withdraw money from your HELOC, you’ll receive monthly bills with minimum payments that include principal and interest. Payments may change based on your balance and interest rate fluctuations, and may also change if you make additional principal payments. Making additional principal payments when you can will help you save on the interest you’re charged and help you reduce your overall debt more quickly.
IF YOU’RE UNSURE ABOUT WHICH KIND OF
HOME EQUITY LINE OF CREDIT LOAN SUITS YOU BEST, OR IF YOU HAVE ANY OTHER QUESTIONS, PLEASE FEEL FREE TO CONTACT US.
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