Home equity line 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).  Let me preface this page by saying that if you are looking for a home equity line, start with your bank.  Oftentimes, banks offer these to their account holders with less documentation requirements and fewer fees then a broker can.    If you've tried your bank and they can't help you, give me a call.  There aren't many lenders doing these anymore, but there are a few.

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.

When you take out a HELOC, you pay for many of the same expenses as when you financed your original mortgage, such as an application fee, title search, appraisal, attorneys' fees, and points (a percentage of the amount you borrow).

Most HELOCs have a fixed period (5, 10, even 20 years) during which you can borrow money. Typically, you will use special checks or a credit card to draw on your line. You will be required to make a minimum payment each month – usually the interest that accrued during the draw period. However, the interest you pay is usually tax deductible. At the end of your "draw period," you will be required to pay off the loan, making monthly payments on the principal and interest.

A HELOC is a good alternative to refinancing if you want some cash, but don't want to refinance your first mortgage.  Maybe you have a pre-payment penalty on your first mortgage that is still in affect, or you have a low fixed rate on your first that you don't want to lose.  At a later time, you can always opt to consolidate the first and second mortgage if it will benefit you. 

I would be happy to evaluate your situation and help you decide if refinancing your whole mortgage or simply getting a line of credit would be the most beneficial to you.