Sponsored - With a Home Equity Line of Credit (HELOC), your home can be a great source of low-cost funds to pay for just about anything. With a HELOC, you can turn your home’s equity into low-cost funds for virtually anything. Such as home improvements, education costs, surprise expenses, debt consolidation, and much more!
As you consider a home equity line of credit, here are a few benefits and costs to consider as you unlock the power of your home.
What is a (HELOC)? A home equity line of credit, or HELOC, is a second mortgage that gives you access to cash based on the value of your home. With a HELOC, you borrow against your equity, which is the home’s value minus the amount you owe on the primary mortgage. You can also get a HELOC if you own your home outright, in which case the HELOC is the primary mortgage rather than a second one.
A HELOC normally allows you to borrow up to 85 percent of your home’s value, minus outstanding mortgage payments. If you’re a candidate for a HELOC, here are some of the advantages.
- Qualify for a low Annual Percentage Rate (APR)
Interest rates have been at or near all-time lows, and home equity lines of credit let you take advantage of those rates. HELOCs can have lower interest rates and lower initial costs than credit cards, which makes them attractive for debt consolidation, college expenses, home improvements, and more.
- Interest may be tax deductible
According to the Tax Cuts and Jobs Act of 2017, you may be able to deduct interest paid on a home equity line of credit if you use the money for home improvements. Visit IRS.gov for more details, or consult with a CPA or tax advisor.
- Borrow only what you need
Another advantage of HELOCs is that you can use funds as you need them. Where home equity loans and even personal loans require you to take out a lump sum, you can use a HELOC in bursts if you want, only borrowing the cash you need as you go. If you wind up needing less cash than you thought, you’ll end up with a smaller monthly payment.
Being able to tap into your home’s equity can be a good option. However, you should consider potential drawbacks as well.
- You’re reducing the equity you have in your home
When you borrow through a HELOC, you’re borrowing against the home equity you may have accumulated. Having an outstanding HELOC also limits future opportunities to borrow from your equity.
- You’ll have a variable interest rate
Most HELOCs are financed with a variable rate. This means that your rate can go up or down based on the decisions of the Federal Reserve. So, even if you have a HELOC with a low variable rate now, you could experience rising rates over the life of your loan.
When considering a HELOC, work with a lender you trust who will take the time to understand your financial goals and provide options that work for your budget. Our local, friendly team members at First Commerce Credit Union are available to help you unlock the power of your home. Learn more at HELOC.FirstCommerceCU.org.
First Commerce does not provide tax, legal or accounting advice. The information on this page is for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your tax, legal or accounting advisors for further guidance. Insured by NCUA. Equal Housing Opportunity Lender. NMLS#774895