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If you’re a homeowner in need of some cash, look to your own home. You can tap into your equity through a home equity line of credit, or a HELOC. Let’s take a look at HELOCs and why they can be the most cost-efficient way to borrow money.
What is a HELOC?
A HELOC is a revolving credit line letting homeowners borrow money against the equity in their home, as needed. Since it’s backed by your home, a HELOC will have a lower interest rate than unsecured debt, like credit cards.
Once you’ve been approved, you can borrow as much or as little as needed during a period of time known as the draw period. That time window generally lasts up to 10 years.
How much money can I borrow through a HELOC?
The amount of money you can take out through a HELOC will depend on your home’s total value, the percentage of that value the lender allows you to borrow against and how much you currently owe on your home.
Is every homeowner eligible for a HELOC?
Like every loan HELOCs have eligibility requirements. Exact criteria will vary, but most lenders will only approve homeowners who have a debt-to-income ratio of 40% or less, a credit score of 650 or higher and a home with an appraised value that is at minimum 15% more than what is owed on the home.
How do I repay my HELOC?
Some lenders allow borrowers to make payments toward the interest of the loan during the draw period. When the draw period ends, the borrower will make monthly payments toward the principal of the loan in addition to the interest payments.
For many borrowers, though, repayment only begins when the draw period ends. At this point, the HELOC enters its repayment phase, which can last up to 20 years. During this time, the homeowner will make monthly payments toward the HELOC’s interest and principal.
How can I use the funds in my HELOC?
There are no restrictions on how you use the money in your HELOC. However, it’s best to use a HELOC to pay for something that has lasting value, such as a home improvement project that will increase your home’s value. If you’re a homeowner in need of some extra cash, consider taking out a HELOC through Ohio Catholic Federal Credit Union. Call, click, or stop by today to get started!
Senior Consumer Loan Officer, AVPOhio Catholic Federal Credit UnionEmail: SFaciana@OhioCatholicFCU.comCall: 216.518.7267
Sam has over 50 years of experience in the banking industry.
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