A home equity line of credit (HELOC) is an open line of credit secured against your home. It differs from a mortgage in that there is no fixed monthly payment. (You pay when you use it.) The monthly payment is based on the amount used.
The terms and conditions of the HELOC may vary. When the funds are used, this is considered a draw.
Draw Periods:
This period allows you the opportunity to make draws against the credit line. You can pay down, or pay off the balance and continue to make more draws. Consult with your mortgage professional lender for the terms of your draw period.
When it comes to the interest rate of your HELOC, it is common to have a variable rate. There is a possibility to lock in on a fix rate. As with any type of loan or credit line, your credit will determine the rate. Make sure you discuss the best option with your mortgage professional.
Some advantages of a Home equity line (HELOC):
- Pay off high interest credit card debt
- Invest in Real-estate
- Buy a new car
- Take a vacation
- Start a new business
There could be tax benefits for you, so consult a tax professional such as an accountant to explore this matter.
Always shop around for your loan. Compare rates and terms to ensure you are getting the best deal possible. Always choose reputable institutions when obtaining any type of loan. Always do your own research when applying for a loan.
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