A home equity line of credit, also referred to as a HELOC, can be defined as a line of credit that is secured by your home. For many people, a home is their most valuable asset. With a HELOC, you can use the equity in your home as collateral for another loan.
Before getting access to a HELOC, you need to be approved and your credit amount and interest rate are then determined by your credit score and other factors. The borrower normally has access to credit of about 85% of their home value less the balance remaining on the mortgage. A HELOC can have lower interest rates compared to other types of credit, making it a viable option for people. A HELOC’s interest is tax deductible in some situations. Please consult your tax advisor for advice on tax deductibility.
How Do I Prepare to Apply for a HELOC?
Before you apply for HELOC, it is recommended that you check your credit score. You want to make sure your credit score is in good shape to get approved and get a reasonable interest rate. You’ll also want to work with a trusted lender to see the amount of HELOC you’ll be approved for and have access to. Once you go through the details of the HELOC with a lender, it’ll be time to officially submit your application with all relevant documents and information needed.
What are the best uses of a HELOC?
Tapping into the equity of your home can be a great way to access quick cash, but you should put it to proper use, as the HELOC is using your home equity as collateral. Here are the best ways to make use of a Home Equity Line of Credit:
- Home remodeling and renovation – This is the most common use of HELOC. You can borrow the amount you need to make home improvements that will pay off if/when you decide to sell your home.
- Consolidating debt – A home equity line of credit may have a lower interest rate than other debt you may have, which can help you pay down high interest debt if you know you’re able to afford and make your HELOC payments.
- Financing college education – Some people use the equity they’ve built into their home to help finance their children’s higher education, depending on their situation.
A HELOC may be the right financial decision for you! Learn more and apply for a Home Equity Line of Credit by contacting our experienced lending team today!