Obtaining a HELOC is similar to taking out a second mortgage on your home, but obtaining the funds themselves is more like using your credit card. Generally, a limit is set as to how much money the homeowner can get on their line of credit. This limit is determined by such things as your credit history, your income and debt, the value of your home, and the amount you still owe on it.
A HELOC is a good way to get money for such items as ongoing medical bills or college tuition, since they let the homeowner get a lump sum as needed. The HELOC is then paid off in monthly payments in the fashion of a credit card with a minimum balance due. There's also the option to pay more or even all of the balance off, eliminating interest charges.
Interest rates for a HELOC are based on the Prime Rate, often with an added "margin" which is actually an increase in the interest rate. While interest rates are usually lower for a HELOC than for a regular bank loan or credit card loan, the rates are usually higher than those for a first mortgage.
Interest paid on a HELOC is often tax deductible (talk to your tax person to be sure), and there are usually no closing costs. There may, however, be an annual fee, so ask questions when you shop for your HELOC.
If the equity you have available on your Lakeland real estate gets too low for you to take out more money from your credit line, the bank may have the option to freeze your HELOC. It should also be noted that some banks have been accused of using "automated valuations" to unfairly determine the equity in your home as being lower than previously thought. At this point, they may again freeze your line of credit. If you were planning on this money to make a payment, the freeze on your account could become a huge problem.
Another way of getting into trouble with a HELOC is by taking out more money from your line of credit that you can readily repay. Don't forget, your home is the collateral for this money and if you can't pay it back, you're putting your family's home on the line.
There are lots of options available for homeowners. Whether you want to stay where you are and perhaps get a HELOC, buy a new home, or sell the one you're in, The Boyce Team can help you decide what's best for you. Contact Damion Boyce today and set up an appointment to see how they can help you.