Home Equity Lines of Credit

If you need to borrow money to pay off debts or make a major purchase, a home equity line of credit (HELOC) can be useful. A HELOC is a form of revolving credit secured by the equity in your home. This is an open ended loan that can be paid down or charged up for the term of the loan, much like a credit card. The interest rate fluctuates (typically monthly).

With a HELOC, your lender will approve you for a specific amount of credit - the maximum amount you may borrow at any one time under the plan. In determining your credit limit, your income, debts, credit history and other financial obligations will be reviewed. An appraisal will be required on your home to determine the home's market value. Your credit limit will be based on a percentage of your home's appraised value, which is then subtracted from the balance owed on your existing mortgage.

For the most part a HELOC is an interest only payment. If you have a fixed HELOC you should sonsider replacing it because the prime rate which HELOC pricing is based off of is 3.25% right now. That's cheap money.

At one point in time a Home Equity Line of Credit could go up to 100% of the value of the property. Currently the industry standard is 70% to 80% combined loan to value.

The best feature about a home equity line of credit is that it is money for a rainy day. It is like a giant credit card on your house that can be tapped into for emergencies, college, a trip, a car loan or a medical issue. If you have equity in your home, I can obtain an equity line with a good score at a relatively low cost.