Put Your Home to Work with a HELOC

A HELOC offers fast, flexible financing.

Even if you haven’t owned your home for a long time, the equity in your property may have grown significantly because home values have risen steadily over the last few years. If you need emergency funds or money for an important project or purchase, you may be living in the solution.

What is home equity?

Home equity is the difference between the balance on your home loan and the appraised value of your home. The amount of your purchase down payment creates immediate equity. The amount of your monthly mortgage payment that goes toward the principal balance creates equity. Increases in the value of your home create equity. Home equity is wealth, but it’s not liquid. You can’t access it without a financial transaction such as refinancing or taking out a Home Equity Line of Credit (HELOC).

How does a HELOC work?

A HELOC is a line of credit you access as needed. Your credit limit is based on the amount of equity you have in your home. Advantages include:

• Rates – May be fixed or variable and are usually lower than credit card rates.
• Flexibility – Borrow only what you need and repay as much as you wish (must meet minimum payment requirements).
• Convenient funds – Access your money via check, personal withdrawal, or debit card.
• Fast loan process – You may not need an appraisal, and your credit history is not usually a factor because the line of credit is secured by your home.
• Cost-effective – You pay interest only on the amount you borrow, not on the entire line of credit.
• Easy closing – There are no closing costs and you may be able to close at home.
• Tax advantages – Consult your tax advisor to find out if your HELOC interest is tax deductible.

Refi or HELOC?

Another way to tap your home equity is through a cash-out refinance. If your goal is to reduce your monthly mortgage payments to improve your cash flow, or reduce the interest payments over the life of your loan, there are other types of refinance to discuss with your licensed CrossCountry Mortgage loan officer.

Deciding between a refi and a HELOC depends on several factors. Here are a few to consider:

• Can you refi your entire loan to a lower rate? You may save more money and still access your equity.
• How are your credit scores? They may not matter for a HELOC, while lower scores could impact your refi.
• Do you just need access to an emergency fund? A HELOC could be the better choice since you only borrow what you need.
• Do you want stable monthly payments? A fixed-rate refi offers more certainty because the amount you borrow doesn’t change and the rate is fixed for the life of the loan.

What can you do with a HELOC?

When you’re thinking about a HELOC and considering how you want to spend the funds, remember that you are borrowing money against the value of your home. If you can’t keep up with your payments, you could put your home at risk, so make sure you’re using your HELOC funds for important purposes. Gambling on the stock market is probably not one of them!

Some reasons you might want a HELOC:

• Create a line of credit for emergencies.
• Pay for educational expenses.
• Renovate your home.
• Pay off higher-interest consumer debt.
• Purchase expensive items like a car or home appliances.

As you can see, there’s a lot to consider with a HELOC. Talk to your licensed CrossCountry Mortgage loan officer to find out if a HELOC, or another type of home loan, is right for you. Call or email today.