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A home equity line of credit or HELOC is the best way to get the cash you need, whether you’re trying to consolidate your debt for medical or large expenses like credit cards, or want to work on your home. Be Over the years, this type of lending has declined, but recently lenders have seen an increase in applications for HELOCs from lenders. For people who own a home and are trying to restructure their finances, a HELOC can be a great option. Here are the things you should know before considering a HELOC.
What is a HELOC?
A HELOC is similar to taking out a second mortgage on your home, but you don’t need an existing first mortgage to get a HELOC; A HELOC can be either a first or second mortgage. If you want to save money and have access to the funds you need without relying on expensive credit cards, a HELOC is the perfect way to go. If you want to get a HELOC, simply fill out an application with the lender you choose, use your home’s equity as collateral, and the lender approves the loan for a certain amount. But, a HELOC differs from a traditional mortgage in that the lender will not advance the full amount of the loan when the loan is made. It works similar to a credit card, in that you can take an advance on the loan when you need funds.
Typically, you would do this with checks that you would write yourself and deposit at your bank. On doing so, the check amount gets added to your loan amount. HELOCs are like a traditional mortgage in that you have to make monthly payments on the loan. Your lender will give you between five and ten years to get out of the loan, during which time you will only have to pay interest on a monthly basis. Interest payments will fluctuate and depend on a number of factors. After the withdrawal period is over, you will have to repay the entire loan with monthly payments. The lender usually gives you between ten and twenty years to repay the loan. HELOCs are great for paying off major bills and unexpected expenses.
Dual rate HELOC from credit unions
As previously mentioned, HELOC interest rates are calculated every day, and they will fluctuate based on a number of factors. Some banks give you access to dual-rate HELOC loans. This loan will guarantee an interest rate that you have fixed at just 2% for the first two years. This introductory rate period will end and the standard lower interest rates will apply. Many banks charge high interest rates and very high fees with HELOC products, while some banks have low interest rates and no closing costs on HELOCs in amounts up to $100,000. Some banks approve instantly, some within minutes.
HELOCs are a great option for getting the cash you need at a rate you can afford. For those who own a home and need money to update your home, pay medical bills, make home repairs, or pay for college expenses, call your local credit union today. and find out how they can help you reach your goals. Be sure to speak with a mortgage specialist in person to find out about all of your lending options.
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