Home Equity Line of Credit

HOME EQUITY LINE OF CREDIT (ALSO KNOWN AS HELOC)

Home Equity Line of Credit in Ohio and Pennsylvania

A Home Equity Line of Credit (HELOC) is a form of revolving credit in which your home serves as collateral. Homeowners use credit lines for items such as medical bills, home improvements, education, and for unexpected financial difficulties that may arise. With a HELOC, you will be approved for a specific amount of credit. Example: If you are approved for a $50,000 line of credit you are able to use up to that amount, not to exceed $50,000.

How are Credit Limits Determined?

• Appraised value of your home
• Credit history
• Income and ability to repay
• Other financial obligations

After you are approved for a HELOC, you may borrow up to your credit limit at any time depending on your needs. Most lenders will provide you with special checks that you can use to draw against your credit line.

Home equity Lines of Credit most likely will involve a variable rate as opposed to a fixed rate. The most common variable rate is based on the prime rate plus a margin. Because the cost of borrowing is tied directly to the index that is used, you will need to check the value of the index for changes in your rate. The prime rate can be found in the Wall Street Journal and other financial newspapers. Some lenders will allow you to convert from a variable rate to a fixed rate during the life of the plan.

Costs associated with HELOC:

• An application fee for applying for the line of credit. (Some lenders will waive this fee).
• Property report (appraisal) to estimate the value of your home.
• Closing costs which include title search, mortgage preparation and filing, property and title insurance, and taxes.

Benefits of HELOC:

• Can be used to consolidate high interest credit card debts.
• Tax advantages that are not available with credit cards; interest on equity lines of credit is tax deductible.
• You may borrow money, pay it back, and then borrow the money again as needed.

If you have a very low fixed interest rate on your first mortgage and do not want to refinance, a HELOC is usually your best option. It can give you the cash you need, when you need it, and help you with long term financial planning.

Contact AG Financial to see how we can help you with your home equity loan refinancing today.