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What You Need To Know Before Taking Out A HELOC
By MARIA SCINTO
Pro: Interest
A HELOC is a line of credit secured by your home’s equity, so the bank considers it as a safe loan and lends at lower rates than personal loans or credit cards.
While HELOC interest rates typically start lower, they fluctuate with the market as set by the Federal Reserve. Since it’s an ongoing loan, you can’t lock into a rate.
Pro: Access
HELOCs have the flexibility for you to spend and pay back as needed. You can borrow up to a certain amount, but you’re not obligated to use the entire loan.
Pro: Payments
HELOCs don’t have the typical points and charges associated with home equity loans. As a line of credit, you only pay interest on the amount you use.
Compared to a home equity loan, a HELOC could save you thousands in interest fees throughout your repayment period if you didn’t use the total amount available.
Pro: Qualifying
If you got a conventional mortgage with a 20% down payment, you may already qualify for a HELOC, as long as your home hasn't decreased in value since purchasing.
You'll likely need proof of income, and the lender will pull your credit score, but if the numbers look good, you won't have to prove how you plan to use the money.
Pro: Taxes
A great HELOC benefit is using some or all of the paid interest as a tax deduction; just check with your accountant since conditions apply, like how the money was spent.