How to Get the Best Home Equity Line of Credit Available

Did you know that you can use the equity that you’ve built up from your home to accomplish financial goals such as paying off credit card bills, paying college tuition, and completing home renovations? Read on to learn more about getting the best home equity line of credit in your community.

What’s a Home Equity Line of Credit?

The home equity line of credit, also referred to as a HELOC, is like a credit card in that you can borrow up to a set limit over time. You repay any money borrowed with interest. The crucial difference between a home equity line of credit and a credit card is that in a home equity line of credit, you are using your house to guarantee payment.

You may borrow up to 80% of the value of your home, minus the amount that you still owe on your mortgage. So, for example, if your home is worth $200,000, the maximum amount that you could access in a home equity line of credit is $160,000. Now, let’s say that your mortgage on the house is $140,000. The total amount of money available through your home equity line of credit would be $20,000.

How do You get a Home Equity Line of Credit?

You’ll work with a lender to establish a HELOC. As with any home loan, lenders look at factors such as your credit history, income, and the appraised value of your home to determine your eligibility for a HELOC. Lenders value high credit scores and give the best interest rates and loan terms to entice those borrowers.

Don’t give up if your credit score isn’t fantastic; there are HELOCs for borrowers with less than perfect credit. Be aware that you may have to pay a higher interest rate. A benefit of a HELOC is that you can use it to improve your credit score so that you’ll be in a better position for future loans.

The loan specialists affiliated with Homes for Heroes are experts at finding outstanding HELOC options for Heroes in their communities. If you use a lender affiliated with Homes for Heroes for your home equity line of credit, the lender will help save you money by reducing their loan fees. SIGN UP for a referral to a Homes for Heroes affiliated lending specialist in your area.

Are There Any Risks to Using a Home Equity Line of Credit?

The most significant risk comes from the fact that the interest rate that you pay on any money that you owe will move up and down based on the prime interest rate. Typically, lenders inform borrowers of the highest possible interest rate for a specific loan. Make sure that you’re able to make payments with the maximum interest rate before you take the money out of your home equity line of credit.

In a worst-case scenario, the lender can take your house if you can’t make the payments on your HELOC. Protect yourself by understanding the details of your loan and being careful regarding how much money you owe at any given time.

How Will a Lender Decide the Value of My Home?

The lender decides on the current value of your home based on the results of an appraisal. The lender pays an independent and licensed appraiser to examine your property and determine its current value. Since the amount of money available to you in a home equity line of credit depends in part on the value of your home, it is essential that you do everything possible to help your house appraise at a high level.

• Mow the lawn and trim overgrown hedges and trees near the house.
• Sweep the sidewalk and front steps.
• Wash the windows.
• Repair any roof and gutter problems.
• Make sure it is simple to unlock and open the front door.
• Declutter so that the appraiser can move throughout the house with ease.
• Check electrical outlets, lights, overhead fans, and repair if necessary.
• Clean appliances and make sure that they work.
• Test smoke detectors and carbon monoxide detectors.
• Examine the heating, air conditioning, and plumbing systems and hire a licensed professional to make repairs.

Smart homeowners know that an appraiser also looks at recent comparable sales in the neighborhood to arrive at a houses’ value. Help the appraiser by providing information on recent sales in the community and anything that might raise the overall future value of property in the area. For instance, if a significant employer has announced plans to move its headquarters to your neighborhood, the appraiser needs that information.

If possible, ask your lender to use a local appraiser for the appraisal. A local appraiser knows the real estate market in your area and is more likely to assess the value of houses in the neighborhood accurately.

What Happens to the HELOC if the Value of the House Goes Down in the Future?

The lender might temporarily freeze the home equity line of credit if the value of the house decreases dramatically from the value at the start of the HELOC. Be sure and examine all the loan details before you agree to a specific home equity line of credit with a lender.

Any Parting Advice?

Remember that you must pay back any money that you use from your HELOC. Devise a monthly payment plan and stick to it. Repay any money that you owe on your HELOC before you make any significant withdrawals.

Also, financial experts suggest that you utilize your HELOC for wealth building activities, such as paying off high-interest rate credit cards and home renovations, instead of using the funds to take that dream vacation to Europe.

Lastly, using the equity in your home to establish a home equity line of credit is a fantastic way to finance significant financial opportunities in your life. SIGN UP for a Homes for Heroes referral to an affiliated loan specialist in your community who specializes in finding the best available home equity line of credit loans for Heroes.