HELOC the acronym for a home equity line of credit. A HELOC works like a credit card, but it is secured by your home. You can borrow against it, and then pay it down, just like a credit card.

If you have equity in your home, but you need some cash to consolidate debt or make home improvements, then you would consider a HELOC.

Many people today consider HELOCs instead of taking cash out and refinancing their home because they do not want to lose the low interest rate they have on their mortgage.

You may also want a HELOC even if you don’t need the funds now. You don’t have to draw on it, but you can have the line available in case you need emergency funds.

A HELOC is typically a variable rate loan based on the prime rate plus a factor (e.g. the rate can be prime + 1 or prime + 1.5). The loan has a 30-year term, and the first 10 years are interest-only. There is not a pre-payment penalty, but there may be an early termination fee of several hundred dollars if closed early. Also, there may be an annual fee, usually less than $100.

If you are considering a HELOC, give us a call and we can help you decide if it is right for you!

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