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HelpA home equity line of credit is a perfect way to tap equity in your home. At the most basic level, a HELOC essentially allows checkbook access to your home’s equity to use however you wish. Let’s look at some of the benefits you can receive with a home equity line of credit.
- Money When Needed – Unlike with other loans where you receive a lump sum, with a HELOC you’ll receive essentially a checkbook that gives you access to your equity when needed. How much of the available equity you draw down is up to you.
- Interest Paid Only on Money Drawn – You’ll only pay interest when you have an outstanding balance on your line of credit. Note that with some banks you may have to pay an annual fee to keep the line of credit open if you haven’t drawn on it for some period of time.
- Competitive Interest Rates – Generally speaking you’ll receive a better rate of interest on a home equity line of credit than you would on a second mortgage. With a variable home equity line of credit, your rate will usually fluctuate within a percentage point or two of the prime rate.
- Minimal or No Closing Costs - Unlike with a second mortgage or cash out refinance, you should be able to find a lender that will offer a HELOC with minimal or even no closing costs.
- Tax Deductible Interest – Save come time tax time, because you’ll be able to write off interest paid in the prior tax year.
The best time to take out a HELOC is before you need it. You never know when you might have to draw on your line of credit for an unexpected expense.
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