What is a HELOC? Could one help me?

Contributed by Cara Dalton, SVP - Director of Marketing

What is a Heloc

So you have heard of a home equity line of credit (HELOC), but aren’t sure if it make sense for you. Here are some things to think about and three ways homeowners typically use HELOCs. The difference between the appraised value of your home and the balance of your mortgage is home equity. You may be able to borrow a portion of that equity and use it as a revolving line of credit secured by your home. This is a home equity line of credit.

How much equity do you have?
Appraised value – Mortgage(s) = Home Equity

When you choose a home equity line of credit you may borrow and repay up to the loan limit as often as you would like throughout the term of the loan, typically making minimum interest only monthly payments. At the end of the term of the loan, the balance must be repaid in full over a set period of time. One of the biggest benefits of home equity lines of credit can be very attractive interest rates.

1. Improve Your Home
Do you or your family have changing needs? Are you looking to update a kitchen or bath? Additions, repairs and renovations can be a great way to upgrade your home.
Tip: Not all home improvements add value to your home. Pay close attention to costs, personal value, and potential return on your investment.

2. Access Lower Interest Rates on Credit
Home equity line of credit interest rates my charge much lower interest than other borrowing options including credit cards. The average rate for a variable-rate HELOC was about 5.6%, while the average variable rate credit card was about 17.6% at the end of 2018 according to Bankrate.com. In addition, most banks offer promotions for an introductory period on home equity lines of credit. Also, the interest you pay on purchases to buy, build or improve your home may be tax-deductible that secures the loan. (Be sure to consult a tax advisor to see if you would qualify.)
Tip: Remember a home equity line of credit has a variable rate, and you are borrowing against the equity in your home. If you don’t make your payments, you could lose your home.

3. Debt Consolidation
With a lower interest rate than many other lines of credit a home equity line of credit is a good option for combining debt, simplifying payments, and reducing interest expense. The benefits all depend on individual circumstance.
Tip:Remember that after consolidation your previously unsecured debt is now secured. It is critical to be confident you can afford the payments. Be careful to not run up new debt on the newly paid off credit cards.

Our team can help discuss a home equity line of credit in further detail. Learn more here.

At CIBM Bank we understand your hard work, your commitment and the financial decisions you have to make on daily basis -- whether that be for your business, or buying or maintaining a home, or just your day-to-day financial-related needs. We also understand there are times you just need some help. And that’s what we’re here for. To help makes things a little easier for you, to provide experts who can walk you through the variety of options to best meet your particular needs, and to provide just a little more peace-of-mind. Call us or visit www.cibmbank.com

The information expressed is being provided for informational and educational purposes only. It is not intended to provide specific advice or recommendations for any individual. CIBM Bank does not provide tax, legal, or accounting advice. You should carefully consider your needs and objectives before making any decisions. For specific guidance on how this information should be applied to your situation, you should consult your own tax, legal, and/or accounting advisors before engaging in any transaction.