Home Equity Loans

A home equity line of credit, also known as a HELOC, is a line of credit secured by your home that gives you a revolving credit line to use for large expenses, to make home improvements, or even to consolidate debt on other loans, or credit cards. 

With a HELOC, you’re borrowing against the available equity in your home and the house is used as collateral for the line of credit. As you repay your outstanding balance, the amount of available credit is replenished – much like a credit card. This means you can borrow against it again if you need to, and you can borrow as little or as much as you need throughout your draw period, up to the credit limit you establish at closing. At the maturity of the loan, the balance must be paid in full.  

A HELOC has a variable rate.

When you have a variable interest rate on your home equity line of credit, the rate can change from month to month. The variable rate is calculated from both an index and a margin.

An index is a financial indicator used by banks to set rates on many consumer loan products. Most banks, including Dream First Bank, use the U.S. Prime Rate as published in The Wall Street Journal as the index for HELOCs. The index, and consequently the HELOC interest rate, can move up or down.

The other component of a variable interest rate is a margin, which is added to the index. The margin is constant throughout the life of the line of credit.

As you withdraw money from your HELOC, you’ll receive monthly bills with minimum payments of the interest due.  Payments may change based on your balance and interest rate fluctuations, and may also change if you make additional principal payments. Making additional principal payments when you can will help you save on the interest you’re charged and help you reduce your overall debt more quickly.
 

Anything you choose. Such things can include but are not limited to home renovations, pay off expensive debt, start a business, make major purchases, managing financial emergencies, college expenses, or buying a car.

To qualify for a HELOC, you need to have available equity in your home, meaning that the amount you owe on your home must be less than the value of your home. You can typically borrow up to 80% of the value of your home minus the amount you owe. Also, a lender generally looks at your credit score and history, employment history, monthly income and monthly debts, just as when you first got your mortgage.

Closing costs are fees and charges that the lender and third-party services impose to secure and process a home equity line of credit. HELOC closing costs are typically lower than primary mortgage closing costs.

No, you don't!

If you have enough equity at the time of closing your home purchase, you can get a HELOC in as little as 30 to 45 days.

Yes, it is. 

Using the equity in your home is a great way to improve your property, consolidate high-interest debt, finance important life events, or even cover unexpected emergencies. The interest rate you get is often lower than with unsecured loans,  and maybe tax deductible.  Please consult your tax advisor regarding interest deductibility as tax rules may have changed.