Here are a few buzzwords that are thrown around in the home lending industry often. You my hear of a HEL or a HELOC.
HELOC is just the short form of Home Equity Line of Credit meaning an open-end line of credit. A home equity line of credit (Heloc) is a revolving line of credit with an adjustable interest rate which is indexed to the prime rate. Another form of a Heloc is a fixed-rate loan that allows you to leverage the equity in your home into cash, refinancing or to consolidate debt. Home equity lenders give you a line of credit up to 85% of your appraised homes value, minus the current mortgage loan balance. This of course is decided on your credit and your amount of debt.
What can a Heloc do for me?
You can get a loan at a lower interest rate than other loans and be able to get cash to use the way you want:
Benefits of the HELOC loan
- Low Interest Rate
- Large sum of cash to spend, A HELOC is normally considered the cheapest source of cash
- Different ways to access your line of credit including checks or credit cards
DisAdvantages of the HELOC loan
- You must use your home as collateral
- Large final payment, ballon payment
- Could put you more in debt if you do not plan ahead
Comparing Rates with HELOC. Home Equity Line of Credit is the rate on open-ended lines of credit based on a $10,000 line, or on the minimum to borrow if it is above $10,000. The LTV is 80%. Introductory rates may be included, but only if the introductory rate applies to a $10,000 credit line or to the minimum line offered if it is above $10,000. Home equity loan (HEL) is a 60-month fixed rate, fixed term secured loan based on a $10,000 loan or on the minimum to borrow if it is above $10,000. The LTV is 80%. A lien must be placed on the property for this type of loan.