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Should I Get a HELOC?
Should I Get a HELOC?
 
Thankfully, many of our clients are happy with their mortgages.  The interest rate, the terms, the peace of mind --- all are satisfactory and there's no motivation to change or refinance.  But what happens if there's a need to use the equity in the home to finance a remodeling project, a large purchase or to just have a "safety net?"  A home equity line of credit or "HELOC" can be used to meet these purposes, but should you get a HELOC and, if so, how do they work?
 
What Is a HELOC?
A home equity line of credit, or HELOC, is most often a second mortgage or junior lien, that "goes behind" your existing (first) mortgage.  Unlike a traditional "closed end" mortgage that is fully-amortized, a HELOC usually allows the borrower to draw a balance on a line or limit, then pay it back and repeat the process again.  So, where your typical mortgage may start at $400K, for example, and with every payment made will see its balance reduced a little further until completely paid off, a HELOC might have a limit of $50K.  Our homeowner may "draw" $35K on the line to purchase a vehicle, then pay ... more

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