‘Equity’ is the magic word when it comes to your home. The more equity in your home, the more money you can borrow from it. Home equity is the difference between your home’s value and the unpaid balance of your current mortgage(s) and or any other loans secured against your property. The more you’ve paid down your mortgage to date, the more equity you will have access to.

Many homeowners look to tap into their home’s equity but aren’t too keen on taking on a second or third mortgage. Luckily, there is another option. In order to gain access to this equity, you can take out a Home Equity Line of Credit aka HELOC.

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WHAT IS A HELOC?

A Home Equity Line of Credit is a revolving line of credit secured by your home. Your HELOC allows you to access up to 65% of your home’s value, and you can use it for whatever you need.

You are not given the entire sum at once but advanced as much as you want at a time. Interest is only paid on the amount you withdraw and not the entire limit. Should you decide to pay off the HELOC’s balance in full, you can do so by making a lump sum payment without any prepayment penalties. You can also make extra payments on top of your monthly payments to reduce the balance of your HELOC without paying it off in full, again, without any prepayment penalties. It’s your Home Equity Line of Credit and is your call how you handle it.

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WHAT ARE THE BENEFITS OF THIS TYPE OF LOAN?

HELOCs offer many advantages to borrowers. They are like credit cards because you do not have to pay the full balance at once, you only have to make monthly payments. Plus, once you do pay it down, you can access the funds over and over again.

A HELOC can be used for everything from home renovations to making sure your kids see the best orthodontist in the city.

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WHY DO PEOPLE CHOOSE HELOCS OVER SECOND OR THIRD MORTGAGES OR REFINANCING?

For some people, HELOC’s are the wiser choice because they have the option to re-use the credit line over and over once it has been paid down, which is different than a 2nd or 3rd mortgage.

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If you’re unsure as to whether you are the right candidate for a Home Equity Line of Credit, contact us.