Been in your home a while? A Home Equity Loan or a Home Equity Line of Credit (“HELOC”) might be a great way for you to tap into the value you’ve been building up over the years.
Home Equity Loans and Lines of Credit both allow you to access the value that’s built up in your home. You’ve been building equity by paying down your mortgage along with any increase in market value your home may have enjoyed since you’ve owned it. A Home Equity Loan or Line of Credit allows you to tap into that difference between “what you owe” on your home and “what it’s worth.”
What is a Home Equity Loan? A Home Equity Loan is paid out in one lump sum. Then, the loan is repaid on a fixed rate schedule for a specific amount of time. You always know what your monthly payment is going to be, and the rate stays the same throughout the life of the loan. A Home Equity Loan is a great way to take advantage of your home’s existing value for a large, one-time, expense…like education, medical expenses or, maybe, a boat.
What is a Home Equity Line of Credit (HELOC)? A Home Equity Line of Credit is also accessing your home’s accrued value but, instead of paying that amount out to you in one lump sum, you are allowed to access it on an “as-needed” basis by using standard checks.
A Home Equity Line of Credit requires monthly payments but the repayment schedule will vary depending on how often you use it. As an example, say you’ve opened a Home Equity Line of Credit for ten thousand dollars. You decide to write a three thousand dollar HELOC check for a cruise. That means you now have a balance due of three thousand dollars, but you still have access to available equity of seven thousand dollars. You’ll get a statement every month showing your required minimum payment, the amount you have out as a loan, the current percentage rate on the loan and the amount still available to you as equity. A Home Equity Line of Credit is almost as flexible and as accessible as a credit card, but usually at a lower rate and, because it’s a mortgage, your HELOC could qualify you for some income tax breaks (ask a professional tax advisor for details).
A Home Equity Loan or Line of Credit isn’t right for everyone. If you think it might be right for you…or if you have questions, contact a Blue Diamond Mortgage Specialist. We’ll take the time to sit down with you and discuss current Home Equity Loan options. We’ll answer your questions and determine the best Home Equity product for your particular needs. (All Home Equity Loan products require that you complete an application; schedule a professional appraisal; and schedule a closing with one of our Blue Diamond Loan Specialists.)