Your home is more than just a roof over your head–it can also be your most powerful financial asset. And the best part? You don’t have to sell it to tap into its value. That’s where a HELOC comes in.
A home equity line of credit—or HELOC—lets you access your home’s equity to fund home improvements, for debt consolidation, and for major purchases. Variable interest rates on HELOCs often are lower than rates for personal loans and credit cards, making HELOCs a more affordable way to borrow money.
How do HELOCs work?
HELOCs provide flexible access to funds you can draw from when you want to. You can use as little or as much of the line of credit as you’d like. You repay the loan as you use it in convenient monthly payments.
How is a HELOC different from a home equity loan?
A home equity loan provides you with a fixed sum of cash delivered to you all at once that you then pay back. The monthly payment is a fixed amount through the life of a loan.
With a HELOC, the line of credit is available for you to use as you need it during the draw period, making monthly payments on the amount you use. Once the draw period ends, the repayment period begins—at that point, you can no longer withdraw funds and you’ll continue making payments until the balance is paid off.
How much can I borrow with a HELOC?
You can typically borrow up to 80% of the value of your primary residence home minus the amount you owe. Check with your lender to see what amount you are eligible for. HELOCs are also available on second homes.
What if my mortgage is already held by another lender?
SAFE members are still eligible to apply for a HELOC even if their mortgage is with another lender.
What is the process to get a HELOC?
While not as intensive as applying for and obtaining a mortgage, there are similarities.
For the application, you’ll need to provide information such as proof of income, homeownership, and insurance.
The lender will run a credit check and arrange an appraisal to determine the current market value of your home. To finalize the loan, you’ll need to review and sign the loan documents and pay any closing costs, if applicable.
What can I use it for?
- Home improvements and repairs: Most people use HELOCs to upgrade their homes or pay for repairs. There are several benefits to this, including paying a lower rate than with most credit cards and it lets you keep your savings for another use.
- Debt consolidation: If you have credit card debt with high interest rates, a HELOC could be one way to consolidate that debt into one payment at a lower rate.
- Medical expenses or student loan debt: If you have big, lingering bills, a HELOC can help you close those loans and create a more manageable payment.
- Major purchases and life events: Some people use HELOCs to start a business, help pay for higher education, weddings, or dream vacations.
- Peace of mind: Having that extra line of credit available when you need it can reduce financial stress when facing emergency expenses.
If you’re interested in learning more or applying for a HELOC, SAFE is here to help! Contact us today to get started.
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