HELOC? Is it me you’re looking for…to better your home financing options?
Do you have a large amount of equity built up in your home? Are you looking to further enhance your financial position? A HELOC may be just the type of financing that you are looking for.
HELOC is an abbreviation for Home Equity Line of Credit. Basically, a HELOC is a credit account that is secured by property that a person owns. This account can be drawn against by the property owner for any number of reasons such as renovations, paying bills/consolidating debt, making a large purchase such as vehicle or property, investing for retirement, etc.
The HELOC option – when used properly, can be a very powerful tool when looking to enhance one’s financial position. In most cases, the interest rate offered on a HELOC is much lower than an unsecured credit line and the limit available can be much higher because the line of credit is secured by valuable property. The interest rate on a HELOC typically sits at/around Prime rate, whereas unsecured lines usually are offered at Prime plus anywhere from 3 to 8%. Considering that retail credit cards often pack interest rates of up to 29.9%, you can see why it makes a lot of sense to have the option of a HELOC, especially for large purchases.
Aside from the interest rate, there are several other attractive options that a HELOC can provide:
Think of these scenarios and imagine the benefits of a HELOC in each case:
As mentioned, a HELOC can provide many options to investors when they have equity built up in a home. Homeowners can borrow up to 80% of the value of their home without mortgage insurance premiums in many cases.
Despite the advantages of flexibility and convenience, a HELOC is not for everybody and requires a higher level of financial management than a typical mortgage loan. For this reason, the requirements for obtaining a Home Equity Line of Credit are much tighter than on a traditional loan. In most cases, HELOC are reserved for customers who display very high credit ratings and strong credit history. The interest rate on this type of account is tied to prime meaning that as interest rates go up, so too will monthly obligations. Also, because in most cases, the customer is only required to make interest payments, there needs to be a commitment to paying of the principal balance if the borrower intends to get out of debt at some point.
As with any financial decision, it is always recommended that you consult with a professional. We at GLM Mortgage Group can help you with various mortgage and loan options. We always do our best to return your calls within 90 minutes!