Is it a Good Idea to Open a HELOC Now?
If you’re looking to fund a home improvement project, consider tapping into your home’s equity with a home equity line of credit, or a HELOC.
What is a HELOC?
A HELOC is a revolving credit line allowing homeowners to borrow money against the equity of their home. Borrowers can withdraw money as needed during a set amount of time known as the “draw period,” which generally lasts 10 years.
Some lenders place restrictions on HELOCs and require borrowers to withdraw a minimum amount of money each time they make a withdrawal, regardless of need. Other restrictions include the requirements to keep a fixed amount of money outstanding or to withdraw a specific sum when the HELOC is first established; however, borrowers are typically free to spend the money however they please.
Most homeowners are eligible for a HELOC with a debt-to-income ratio that is 43% or less and a credit score of 600 or higher.
How do I repay my HELOC?
Repayment of HELOCs varies but is generally flexible.
Many lenders collect interest-only payments during the draw period, with principal payments being strictly optional. Others require ongoing monthly payments toward both principal and interest.
When the draw period ends, some lenders require borrowers to pay back the entire loan “balloon” amount. Others allow borrowers to pay back the loan in monthly installments over a new time period, known as the “repayment period.” Repayment periods are generous, lasting as long as 20 years.
A HELOC can be a great option now!
HELOCs have variable interest rates, which means the interest on the loan fluctuates along with the general interest rate, sometimes dramatically.
The economic fallout of COVID-19 has generated historically low-interest rates. The average APR for fixed 30-year mortgages has hovered at the low 3% for months now, and experts predict it will continue falling. The low rates make it an excellent time to take out a HELOC with manageable payback terms.
Apply for our Early Bird Fixed Rate Special and turn your house into your dream home with a low-rate HELOC! 2.79%* APR – Early Bird fixed rate for the first 12 months.
Use your equity your way! Visit https://www.wefloridafinancial.com/borrow/mortgage/2nd-mortgage or give us a call at 954.745.2400 to learn more.
*APR = Annual Percentage Rate. 2.79% APR for the first 12 months after the date of closing. After 12 months the APR reverts to a variable rate. The rate is based on creditworthiness and LTV (loan to value) at the time of closing and the current prime rate +/- margin. Closing costs are waived, except for the origination fee, as long as the line remains open for 24 months.
Things to keep in mind with a HELOC.
A HELOC places your home at risk of foreclosure if not repaid. Before opening a HELOC, it’s a good idea to run the numbers to ensure you can easily meet the payments.
Also, if you don’t plan to stay in your home for long, a HELOC may not be right at this time. When you sell your home, you’ll need to pay the full balance of the HELOC.
