What the Heck is a HELOC & What are the Benefits?
What the Heck is a HELOC?
And what are the benefits to the homeowner?
What the heck is a HELOC? HELOC stands for Home Equity Line of Credit which is revolving credit based on the amount of the equity in your home which homeowners can leverage to use for additional cash, help finance home improvement projects, and even pay off other credit debts that may carry higher interest rates.
So what are the benefits of a HELOC? Check out these 10 benefits:
- No closing costs. Depending on the lender and a homeowners financial institution, there may be no closing costs. And the stronger your credit is, the better chance there won’t be closing costs.
- Low interest rates. With a HELOC, the interest rates are going to be very attractive since you are using the collateral of your home compared with other loan options. Some financial institutions are also allowing for fixed rates too, so you may be able to benefit from a locked in rate on the interest of the loan.
- No restrictions. Unlike other loan options, a HELOC does not require you to outline how you are going to use the funds, so there is a lot of flexibility in how you use the money.
- Potential tax advantages. Check with your tax advisor about the rules, but there are advantages to using HELOC against taxes, particularly if you are using the money to upgrade your home and putting money back into it.
- No usage fees. Typically a HELOC doesn’t carry usage fees (a fee to access the money), but make sure to check with your lender if there are any fees involved.
- Repayment options. You may be able to adjust your payment schedules like reducing payment to interest only for a set duration and then pay off the balance. Not all lenders allow this, so check with your lender when you begin the application process.
- Caps on rate increases. HELOCs can have variable interest rates (although there may be lenders who set them to fixed), but even with a variable rate if that is your option, there are typically caps on how high the rates may increase which is a huge benefit against other loan options.
- Flexibility with funds. With a typical loan you get the funds in one lump sum. With a HELOC, you have access to the funds as needed, and the best part, you will only ever have to pay interest and principal on the amount borrowed and used at the time. If you haven’t used the whole amount in the HELOC, you won’t be paying on the full amount of the loan.
- Cash emergency fund. Leveraging your home’s equity using a HELOC is like having an emergency fund that is ready to be used when you need it. Now that’s peace of mind.
- Home improvements. One of the best things about a HELOC is using it for home improvements. When you have a renovation project or need to purchase a new appliance, there is money available to use and then done. The more improvements you make, the more equity builds in your home, meaning more funds to be added and access from this revolving line of credit.
So there you have it! If you needed to know what the heck a HELOC was and the many benefits of using one as a homeowner, you are in the know now!
Of course, we are always here to help you, so if you have any questions, concerns, or would like more information on how using a HELOC to make home improvements will impact your insurance coverage, please reach out to the Covered Insurance Advisor team at 833-487-2683 or email firstname.lastname@example.org