Is a Home Equity Line of Credit (HELOC) Right For
Lately, consumers have been hearing a lot about “home
equity line of credit” second mortgage loans.
This type of second mortgage, also know as a HELOC loan,
is gaining in popularity with home owners who need cash.
There are a few differences between a HELOC second
mortgage loan and a traditional one. A traditional second
mortgage loan offers a lump sum that is usually paid
in full upon closing. In contrast, a HELOC second mortgage
loan is set up somewhat differently in terms of payment
and cash available structures.
Your loan officer will outline for you how a home equity
line of credit works. When you are approved for such
a loan, you are authorized by the lending institution
to borrow up to a certain pre-set amount. How much this
amount is depends on factors such as how much equity
you have in your home and how much cash you think you
Rather than getting the full value of the loan immediately,
you can treat the line of credit somewhat like a checking
account, accessing the money you need when you need
it. There will likely be conditions attached to the
loan, such as a minimum amount you must withdraw. There
may also be a limit to the time period during which
you may make withdrawals. Discuss these conditions carefully
with your loan officer before signing any papers.
A HELOC second mortgage loan may be the answer for
you if you have upcoming expenses the total amount of
which are difficult to anticipate – such as medical
bills or home renovations. However, keep in mind that
you will be paying back, with interest, any funds that
you withdraw from a HELOC, and like any mortgage, it
is secured by your home.