Understanding Home Equity Lines of Credit, or HELOC’s
How A Home Equity Line of Credit Could Benefit You
As a homeowner, you enjoy a lot of benefits that don’t come along with renting. No longer do your monthly rent checks go into someone else’s hands, now they go directly towards building equity in your home or property.
That’s something that can come in handy down the road, because inevitably, at some point in time, many homeowners find themselves strapped for cash, be it for a renovation, a repair, job loss, medical issues, or a variety of other circumstances.
Whatever the reason, many of these issues can cost tens of thousands of dollars. This is money that individuals or families don’t necessarily have as extra cash in their checking or savings accounts. That’s when a Home Equity Line of Credit, commonly referred to as a HELOC, can help!
Let’s dig in…
What Is A Home Equity Line of Credit (HELOC)?
A home equity line of credit, also known as a HELOC, is a line of credit a borrower takes out against the equity they already have in their home. A HELOC can offer a lifeline for homeowners needing a large sum of cash fast. There are several advantages of a HELOC to consider:
- Interest rates on a HELOC are typically variable and may be lower than other personal loans or credit cards.
- HELOCs can be used for just about any purpose for a multitude of reasons.
- Borrowers appreciate the flexibility to draw funds from a HELOC when they need it, and as often as they need it up to the extent of the line of credit amount.
Why Utilize A HELOC?
- Repairs, Upgrades, or Improvements
- In many cases, borrowers use a HELOC to reinvest in their property. Whether it’s a new roof, adding solar panels, adding a pool, renovating a kitchen or bathroom, or more. A HELOC can help to increase the value of a property when used for making improvements.
- Long Term Financial Resource
- A HELOC, as opposed to a traditional loan, provides a source of money over a long period, allowing a borrower to tap into its resources as needed while paying back interest ONLY on the amount that was drawn/borrowed. Additionally, HELOCs typically offer a set draw period followed by an amortized term providing this financial resource for an extended period of time.
- Fixed-Rate Lock Options
- Some financial institutions offer fixed-rate lock options on their HELOC product making this loan option even more enticing. With a fixed-rate option, borrowers can convert all or some of the money borrowed on the HELOC to a fixed interest rate, and pay back that amount over a set number of years. The number of locks and rules for how you can use a fixed-rate lock vary from lender to lender.
- Low-Interest Rates / Debt Consolidation
- Because a HELOC allows borrowers to tap into their line of credit over time, it often provides access to cash at a lower interest rate than a credit card (not to mention many of the hidden fees credit cards can charge). That’s why some people also consider a HELOC loan to consolidate debt.
- Emergency Funding
- The world is unpredictable and the unexpected happens (case in point, 2020). If you find yourself out of work or having an unexpected financial hardship, having a HELOC in place is an easy way to access cash quickly and distribute the payments over time.
- Dream Vacation or Wedding
- Let’s face it, many of us have once-in-a-lifetime dreams that may stretch us beyond our readily available cash. A HELOC can provide you the flexibility to draw the amount(s) you need, whenever you need it. You can stop putting off that dream and start planning.
Whether you are considering reinvesting in your home with a big project, or you want to consolidate your outstanding finances under one umbrella, a home equity line of credit is a great option.
Lake Area Bank HELOC Loans
You can rely on Lake Area Bank to offer low, affordable rates for your Home Equity Line of Credit. Wondering if a HELOC is right for you? Learn more – Call us, request to start a HELOC application, or stop by one of our Lake Area Bank locations today.
While we hope you find this content useful, it is only intended to serve as a starting point. Your next step is to speak with a qualified banker who can provide advice tailored to your individual circumstances. Nothing in this article, nor in any associated resources, should be construed as financial, tax or legal advice. Furthermore, while we have made good faith efforts to ensure that the information presented was correct as of the date the content was prepared, we are unable to guarantee that it remains accurate today.