By Larry Saunders
Loan Officer with Mahone Mortgage, LLC.
Variety of Uses for HELOC’s
For many reasons, the Home Equity Line of Credit (HELOC for short) has been a very popular method of borrowing money over the past several years. Banks made it very easy for homeowners to set up this type of home loan over and above their existing first trust loan in any amount from $10,000 on up to 100% of the market value of the a home. This type of loan can generally be arranged quickly with little or no closing costs and the interest rate is lower than many credit cards and car loans. People also like that the interest on a HELOC is tax deductible (well, for most people, anyway).
HELOC’s Provide Ready Access to Cash
The interest rate on a HELOC varies over the life of the loan. Whenever the Prime Rate goes up or down, the interest rate on this type of home loan also goes up or down. In return for taking on the risk of a variable interest rate, a homeowner using a HELOC can withdraw any portion of the approved loan amount for any purpose and pay back the borrowed money whenever they want and then do it time and again. This enables a borrower to have ready access to plenty of money for whatever they want, whenever they want to use it but not have to pay interest on it when they don’t need it.
Read the Fine Print!
Most borrowers who have set up a HELOC assume they have access to the full amount of the Line of Credit for which they were approved. However, it would be a good idea to check the fine print of your loan documents because in the fine print for a HELOC, the bank has the right to NOT provide additional funds if, in the bank’s opinion, the market value of the property secured by the loan has decreased in value. This is exactly what is happening in some parts of the country. The nearby Washington Metropolitan Area is currently defined by Fannie Mae and Freddie Mac as being in a “declining market”. Some banks in these ‘declining’ areas are refusing to advance funds to some borrowers even when the borrower has not withdrawn the full amount of their “approved” loan amount.
Smart Access To Your Money Tip
Fortunately, the Charlottesville real estate market is not defined as a declining market. However, if having access to all the funds in your approved HELOC is important, you might want to consider drawing on those funds now just to be on the safe side. You’ll be paying interest on the borrowed funds, but that will be offset by the peace of mind knowing you have access to the amount you were expecting.
Helping you make smart decisions about your Charlottesville home financing options,
Mahone Mortgage, LLC.
685 Berkmar Court
Charlottesville, VA 22901
If you have a specific question about home equity lines of credit, you may leave a question here in the easy to use comment box or you may email Larry direct at firstname.lastname@example.org.
Larry’s website is : www.larrysloans.com