A home equity line of credit is another credit facility that is tied to your property much like your first mortgage, second mortgage or home equity loan. It is a registered lien against the title of property for the limit you were approved for. In the event you decided to sell your home or simply close out the line of credit it is then discharged and removed from the title.
How does a home equity line of credit work?
Much like a credit card it gives you the flexibility borrow funds and pay them back when you have the funds to do so. Further to that there are a few consistent things no matter which lending company furnishes you with a HELOC.
Common reasons for a homeowner to open a secured home equity line of credit can be as follows but are not limited to.
How do I qualify for a home equity line of credit?
Qualifying for a HELOC comes with much the same criteria as your mortgage. Your income, property and credit score will all play a factor in determining the best possible rate and amount you are approved for. There are multiple institutional lenders that offer home equity line of credits today and we can help you navigate through those options no matter how rough your circumstances are.
Your income can be confirmed a variety of ways and our specialist are happy to walk you through what income documents would be required from you.
As indicated earlier you only pay interest on a home equity line of credit when you carry a balance on it. Secured line of credits are revolving which means you are not required to borrow or use all the funds at one given time. This is the most powerful financial borrowing tool that gives you flexible access and competitive interest rates.
Are there other options if I am unsure about a home equity line of credit?
A home equity loan or second mortgage is a one-time advance provided to you in the form of a lump sum so that you can use the funds right away. You immediately start paying interest on the total amount borrowed because you have received the funds in one lump sum. The criteria required is more based on the equity built up in your property and the underwriting guidelines can be less rigorous to secure an approval. Your ability to repay the borrowed funds is still as important as the home equity line of credit.
Some Pros and Cons
Like that gold or platinum credit card, a HELOC is primed for anyone to abuse access to money. This is part of the reason that banks, credit unions and other financial mortgage companies have stricter underwriting policies in place before they approve you for a line of credit.
Your bank or any other lending company for that matter can choose to lower the secured line of credit limit at any point without as much as a phone call. If we are ever in a real estate plunge and home prices are faced with a downturn, lenders can alter or cancel the original approved borrowing limit on a home equity line of credit. If you are ever asked during your application what the intended use of the money will be this does help with the approval and can give reassurance to the financial institution providing the approval.
A major plus for most borrowers is there is no need to requalify for additional credit. Once your approved you are not obligated to reapply ever year for more funds and your repayment terms remain the same throughout the life of the HELOC.
Considering a home equity line of credit and unsure of what you need to do to qualify – give us a call or apply online today.