From Dean Dowd on September 28, 2010 in General Remodel
If you’re looking to make extensive home improvements, you may be scratching your head at that infamous acronym, HELOC. What is it, exactly? A home equity line of credit is a loan where the lender agrees to lend within an agreed term, accepting as collateral the borrower’s equity on their house. If carefully handled, a HELOC can be a great way to improve financial flexibility and allow for projects with larger expenses. Such a loan is rarely used for day-to-day needs, but rather for larger whammy expenses such as medical bills, school tuition, and (ahem) home improvements. Its different from a standard home equity loan in that the line of credit to borrow equals no more than the credit limit. Think credit card. A HELOC also comes with a variable, rather than fixed, interest rate. Which means that the interest rate can change over time. For better or for worse. If a HELOC seems right for your home improvement needs, make sure that your loan:
- Offers a periodic cap on interest rate changes. Look for a loan that adjusts quarterly in increments of around 0.5% or less.
- Can be converted into a fixed rate loan (HEL) if desired.
- Doesnt restrict your ability to repay principal without penaltyyou want the flexibility to pay down on the loan when you choose.
In addition to assessing your individual situation and financial needs, the best way to begin the process is to learn as much as you can:
To compare home equity quotes, visit MortgageLoan.