“HELOC” is short for “Home Equity Line of Credit.”  It’s a revolving credit line that allows you to borrow money as needed up to your limit, with your home serving as collateral for the loan. Here’s how it works: lenders approve applicants for a specific amount of credit by taking a percentage of their home’s value and subtracting the balance owed on the mortgage. They also consider any other outstanding debt you have, your income and your credit history.

HELOCs allow for more freedom and flexibility. Since you’re opening a line of credit and not borrowing a set amount, you can withdraw money as needed from the HELOC over the course of a set amount of time known as the “draw period.” This is especially beneficial if you’re renovating your home or using the money to start a new business and don’t know exactly how much money you’ll need to fund your venture.

Repayment options on HELOCs vary, but are usually very flexible. When the draw period ends, some lenders will allow you to renew the credit line and continue withdrawing money. Other lenders will require borrowers to pay back the entire loan amount at the end of the draw period. Others allow you to make payments over another time period known as the “repayment period.”

Monthly payments also vary. Some HELOCs require a monthly payment of both principal and interest, while others only require an interest payment each month with the entire loan amount due at the end of the draw period. This can be beneficial when borrowing for an investment or business, as you may not have the funds for repayment on a monthly basis but anticipate earning enough to pay back the entire loan.

If you think a HELOC might be right for you, contact one of our Loan Officers today. They will be able to meet with you to discuss your options and help you make an educated decision about borrowing. Call 360-943-0704.