A home equity line of credit (HELOC) is a line of credit secured by your home. This revolving loan lets you borrow money as you need it up to a specific limit. Once you pay it back, you can borrow from it again.
Home equity lines of credit (HELOC) are credit lines secured by your home. They give you revolving credit for big projects or expenses and can be used to consolidate higher-interest-rate debts on other loans like credit cards. Use the equity in your home to fund your latest home renovation and enhancement projects, consolidate debt, fund college educations or pay for other financial needs.
Home equity lines of credit allow you to secure a loan leveraging available equity — your house is used as collateral for the credit line. When you pay the outstanding balance, your credit amount is replenished similarly to that of a credit card. This nontraditional loan enables you to borrow small or large amounts against your equity during a drawing period of around 10 years. You set a credit limit, and at the end of the drawing period, you repay the outstanding balance over time.
To qualify for a home equity line of credit, you must have available equity in your home. This available equity means that the value of your home must be more than the amount you owe. In most cases, you can borrow up to 85% of your home’s value minus the amount you owe. Your credit score and history, as well as your monthly income and debts, impact your eligibility.
Whether you’re sending your child off to college or fixing up your home, we’re here for you with financial options like a home equity line of credit. Presence Bank stands out as a reliable partner for lending or credit options for several reasons, including:
Here are some FAQs about home equity loans and line credits.
A home equity line of credit (HELOC) is a line of credit secured by your home. This revolving loan lets you borrow money as you need it up to a specific limit. Once you pay it back, you can borrow from it again.
When you take out a HELOC, you borrow money against the equity in your home, which acts as collateral for the line of credit. You get a set draw period and credit limit during which you can continually borrow and repay as needed. Once the draw period ends, you have a set repayment period.
Both home equity lines of credit and home equity loans allow you to obtain a loan using the assessed value of your home. These accounts may help you achieve the same ends, but they are not the same.
They allow you to draw money or borrow multiple times from your available amount. With a home equity loan, you receive a lump sum payment, typically with a fixed interest rate.
HELOCs work like credit cards offering revolving credit lines, except your home is used as collateral for the credit. Home equity loans are traditional loans — you borrow a specific amount given to you as a one-time cash payment. You must then pay regular monthly payments for a fixed payment period.
Yes. You can refinance your house with a home equity line of credit. There are various ways to do this, including refinancing to another HELOC, using fixed-rate home equity loan funds or paying solely by cash-out refinance.
To get a home equity line of credit, you typically need at least 20% equity in your home, a good credit score and an acceptable debt-to-income (DTI) ratio. Lenders also require you to have a steady and adequate income to enable you to pay the balance during the payment period.
You can apply for a line of credit if you meet all of these qualifications. The application process typically involves submitting your personal information, employment records, financial assets, debt and collateral information. After applying, you may wait about a month to close.
Based on a standard 85% borrowing amount, you could get up to $255,000 for a home valued at $300,000. The amount of credit you can get may depend on factors such as the value of your home and the remaining mortgage you owe. It may also vary based on factors like:
The monthly payment for a home equity line of credit varies. It may change based on the loan amount, interest rate, annual fee and payoff goal.
For example, a $50,000 line of credit with 4% interest and a 20-year term would require monthly payments of about $303 to pay it off. A $75,000 line of credit with the same interest and loan term would require monthly payments of $454. If you take out a line of credit for $100,000, you would need to pay $606 each month for 20 years to pay it off.
Bigger payments mean you can pay off the amount faster with less interest.
