How to Get The Best Home Equity Line Of Credit [Ultimate Cheat Sheet]

The best home equity line of credit is going to allow you to do one thing. Get a loan. Many times it’s just called a second mortgage. Although it’s slightly different than a traditional loan in the way that it’s based on the amount of built up equity you have in your home. Think of it as collateral for your line of credit. The bank or credit union will approve it at rates that are normally lower than regular credit cards, which is a positive benefit.

You can use as much or as little as they give you for a loan, so that your payments are based on the actual money you are using. This can be a great way to make larger purchases, do some home improvements, pay down outstanding debts, or even finance your child’s college education.

It’s all up to the borrower to figure out how they want to use these funds, but the HELOC (home equity line of credit) is a flexible credit line that can allow you to do many things and only pay interest on the amount you are using. You’ll get special checks or a credit card that is linked to the line of credit for you to use at your discretion.

According to the Consumer Financial Protection Bureau they recommend that you shop around for the best home equity line of credit you can find. Members Plus Credit Union offers great terms that are beneficial to the homeowner. Here are some extra tips on how to get the best home equity line of credit you need to work for you.

Try To Lock In a Portion At a Low Fixed Rate

For example, you obviously want the lowest APR (annual percentage rate) you can find for your line of credit. The amount in credit you’ll get is based on how much equity you have in your home and how much it’s worth. The average home equity line of credit starts around $20,000 and can go up as high as $250,000.

Banks and credit unions aren’t interested in going much lower than the minimum amount. If you are interested in finding out how much you can use, try a home equity line of credit calculator or talk to a loan specialist. This will at least give you an idea of what you may apply for money-wise.

The good news is that Members Plus Credit Union specifically offers some rates as low as 3.24 %. A secure fixed rate is sometimes a better option than taking a chance on an adjustable one. Above all make sure you read all the fine print on the credit line deal, so that you understand exactly what you are getting into and what the terms are on the life of the loan.  

You Can Only Use The Money For A Specific Period Of Time

The credit line loan is only available for a specific amount of time called a “draw period.” When it’s time to pay it back, it’s called the “repayment period.” Makes sense, doesn’t it?

Usually the payments go up during this time, so what was your minimum payment during the draw period could be drastically different when it’s time to pay up. Find out the specifics of your line of credit before you accept the process. Make sure it’s something you can feasibly work into your budget each month, so you don’t swamp yourself with debt you can’t handle when it comes due.

There is also the worry that once the repayment time ends, you may have a large “balloon sum” to pay off rather quickly.

Keep This Final Point In Mind

If you decide you want to sell your home, you may have to pay off the remainder of what you owe before you do. That sometimes puts people in a tough position if they don’t have the funds to pay the money they have borrowed in full. The idea is to make sure you are going to stay put until you can pay off what you owe.

If you are in a position where you know you’ll make a significant profit by selling your property, you’ll be able to repay the remainder of what you owe on the line of credit without an issue.  When you are ready to explore everything a home equity line of credit can do for you, talk to a lending specialist at Members Plus Credit Union. We are happy to answer any and all questions you might have about this financial process. 

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