Today we are excited to announce the release of our new eBook, 4 Ways to Use a Home Equity Line of Credit (HELOC), which is now available to download by clicking this link: 4 Ways to Use a Home Equity Line of Credit (HELOC) eBook.
Created to address confusion around HELOCs, this free resource covers everything you need to know, including:
- What a home equity line of credit is and how it works
- The advantages of a home equity line of credit
- How to use a HELOC for home improvements, debt consolidation, major purchases and even as an emergency fund
You’ll also find links to other helpful resources, including Prosper’s easy-to-use HELOC calculator, throughout this 10-page guide.
To get your free copy of 4 Ways to Use a Home Equity Line of Credit (HELOC) today, follow this link. Not in the mood to download a file? We’ve got you covered. We’ve laid out the eBook content below, if you’d prefer to read it that way.
In This Article
What Is a Home Equity Line of Credit (HELOC)?
A home equity line of credit, or HELOC, is a revolving line of credit based on the equity you’ve built up in your home. A home’s equity is the difference between the value of your home and your mortgage balance. A HELOC works like a credit card but because the line of credit is secured by your home, you can access more money at a lower interest rate than a credit card or personal loan. Keep in mind that in exchange for the lower rate, your home acts as collateral for the line of credit.
It’s also important to know that with a HELOC, there’s a defined draw period from which you can borrow (usually 5–10 years). Once the draw period ends, you enter the repayment period (typically 10–20 years).
How Should I Use a HELOC?
In short, you can use the funds from a HELOC for any purpose. While home improvements are among the most common uses (remember: your home is the collateral for the HELOC), you may utilize your home equity to consolidate debt or finance a large expense.
However, before you apply, it’s important to know what you want to use your HELOC for. Here are the four smartest ways to use a HELOC.
What is a HELOC and How Does it Work?
Home Equity Line of Credit vs. Home Equity Loan: What’s the Difference?
Is a HELOC a Good Idea? Great Ways to Use a HELOC During COVID-19
1. HELOC for Home Improvements
While there are a number of ways to pay for your next home renovation project, as a homeowner with equity, a home equity line of credit (HELOC) may be the best way to finance your home improvements. Here’s why:
A HELOC offers increased flexibility of funds, so you can use your credit when your projects are completed and invoices need to be paid.
You’ll have less stress as delays and unexpected costs in house projects are common. With a HELOC, you can draw money when you need should costs and deadlines change.
Not sure which projects you want to start on first? A HELOC allows you to gradually withdraw money to pay in stages, as the work is booked and completed.
During the draw period, you may be given the option to make interest-only payments.
HELOC: The Best Way to Finance Home Improvements
2. HELOC for Debt Consolidation
Homeowners who are struggling with high-interest debt may be able to use their home equity to consolidate balances. A HELOC can offer you access to a larger sum of money as an option to consolidate your debt. Here’s why a HELOC could be useful for debt consolidation:
Lower Interest Rates: A key benefit to a HELOC is you may be able to borrow money at a lower interest rate than you pay on your current debt. The lower the rate, the more you’ll save as you pay off your consolidated debt.
One Easy Payment: Instead of keeping up with multiple payment due dates, consolidating your debt with a HELOC helps you manage it all with one easy monthly payment
How to Use Home Equity for Debt Consolidation
3. HELOC as an Emergency Fund
5 If you’re in need of cash fast, a home equity line of credit may be your best solution as a homeowner. A HELOC may offer a variety of benefits when you need access to money quickly, such as when covering an emergency situation like a roof leak or medical bill.
A HELOC allows you access to a revolving line of credit and usually, a HELOC offers a lower interest rate and a higher line amount than credit cards or personal loans. But it’s important to understand you are using your home as collateral. You have to be mindful to only borrow what you can afford to pay back.
How to Improve Your Financial Health During COVID-19
4. HELOC for Major Purchases
Need to make a major purchase, but you don’t have enough in your bank account to cover the upfront cost? A HELOC may help out in that situation. Because, as stated before, a home equity line of credit can provide you access to a large sum of money, depending on how much equity you have built in your home.
Here are some big-ticket items a HELOC can help you cover:
Wondering What a HELOC Will Cost? Try Our HELOC Calculator
Now that you know the smartest ways to use a home equity line of credit, the next step is to figure out if it’s the right option for you. While there are many advantages to a HELOC, if you aren’t able to pay on time, your home is on the line. That’s why it is so important to assess your financial wellness and use the funds appropriately so you can pay back the amount you owe in the time allotted.
If you feel certain a HELOC is right for you, you may want to check how much you can borrow using a HELOC calculator. From there, you can see how much you can borrow and begin the application process.
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT.
To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.
What this means for you: When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.
Eligibility for a home equity loan or HELOC up to $500,000 depends on the information provided in the home equity application. Loans above $250,000 require an in-home appraisal and title insurance. For HELOCs borrowers must take an initial draw of $50,000 at closing. Subsequent HELOC draws are prohibited during the first 90 days following closing. After the first 90 days following closing, subsequent HELOC draws must be $1,000 or more (not applicable in Texas).
The time it takes to get cash is measured from the time the Lending Partner receives all documents requested from the applicant and assumes the applicant’s stated income, property and title information provided in the loan application matches the requested documents and any supporting information. Spring EQ borrowers get their cash on average in 26 days. The time period calculation to get cash is based on the first 6 months of 2022 loan fundings, assumes the funds are wired, excludes weekends, and excludes the government-mandated disclosure waiting period. The amount of time it takes to get cash will vary depending on the applicant’s respective financial circumstances and the Lending Partner’s current volume of applications.
Spring EQ cannot use a borrower’s home equity funds to pay (in part or in full) Spring EQ non-homestead debt at account opening. For HELOCs in Texas, the minimum draw amount is $4,000. To access HELOC funds, borrower must request convenience checks.
Interest rates may be adjusted based on factors related to the applicant’s credit profile, income and debt ratios, the presence of existing liens against and the location of the subject property, the occupancy status of the subject property, as well as the initial draw amount taken at the time of closing. Speak to a Prosper Agent for details.
Qualified applicants may borrow up to 95% of their primary home’s value (not applicable in Texas) and up to 90% of the value of a second home. Home equity loan applicants may borrow up to 85% of the value of an investment property (not applicable for HELOCs).
All home equity products are underwritten and issued by Spring EQ, LLC, an Equal Housing Lender. NMLS #1464945.
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