As a responsible homeowner who has made timely mortgage payments and has a good credit standing, you can qualify for different types of loans that can be borrowed against the equity you have invested in your home. One of the loan types you may qualify for is a HELOC, which stands for a home equity line of credit. If you are in a financial spot where you need some extra funding, whether it is to help pay for college for your child or to pay for some home upgrades, a HELOC loan could be a good option.
How is a HELOC different than a home equity loan?
A HELOC is different than a home equity loan in a few different ways. For one, the HELOC is a revolving line of credit instead of a fixed-sum line of credit. The loan works almost like a credit card in the fact that you can use the funds as they are needed instead of taking a lump sum all at one time. Additionally, a HELOC has to be paid back by the pay-off date or when the house is sold instead of having to make a payment on the loan every month.
What are the advantages of a HELOC?
The HELOC is an advantageous loan option for homeowners who qualify, even if they qualify for other loan types. A few of the most noteworthy advantages of a HELOC include:
- the funds can be used for other things besides just for the home itself
- you can borrow only what you need at any given time
- interest is charged only on what money you use
- typically have an option to make interest-only payments
- the loan tends to have flexible payment options
How do you qualify for a HELOC loan?
For the most part, you will have to have good credit to qualify for a HELOC loan. The lender will want to see that you have a good credit score and that you have been a reliable borrower in the past. You will also have to have a fair amount of equity paid for in your home. Therefore, HELOC loans tend to be more available for people who have been paying a mortgage for a while or own their home outright with no mortgage at all. The lender may also want to know why you are looking for a HELOC loan, but the requirements here are pretty loosely defined, as you can use the funds just about any way you choose to do so.
Contact a lender, like Rio Grande Credit Union, for more help.Share