There are many large expenditures in your life that can require additional financing. Maybe you want to help yourself save for retirement, or do some major renovations. Would a home equity line of credit (HELOC) or a home equity loan be a viable financing option for your life’s more expensive decisions?  

A HELOC or home equity loan are types of mortgage financing that gives you the ability to borrow cash against the current market value of your home. A HELOC gives you credit to use to pay for some of life’s most important expenses, up to an approved amount. It is a revolving credit line, which allows what you have paid back to become available to use again. A HELOC is similar to a home equity loan, but they are not the same. A home equity loan gives you the entire approved amount right away, whereas a HELOC is charged each time you make a draw or advance during the Draw Period. Additionally, a HELOC generally has a variable interest rate, versus a home equity loan which has a fixed interest rate payment each month.

A HELOC and home equity loan do vary from a standard personal loan because your home is used as the collateral. Your home’s equity is the percentage of your home that you own yourself, versus how much you still owe on the mortgage. As an example, if you have been approved for a $75,000 HELOC, and you advance $50,000 to build a swimming pool, you have $25,000 remaining to use. The HELOC will return to $75,000 once you have paid that amount back in full.

After you have applied, it can take a few weeks for the lender to make a decision on your HELOC or home equity loan. The process is similar to that of applying for a mortgage. Here is the information the lender will generally review in your application:

  • Your home’s current equity and appraised value
  • Proof of your employment and income
  • Credit history, credit score, and other outstanding debts

The lender will then decide how much of a HELOC or home equity loan you qualify for.

Why should you want to access your home’s equity? Here are a few reasons why:

  • You can make home improvements, or major renovations.
  • Consolidate your debt.
  • Acquire more capital for non-home improvement, like investments
  • Acquire extra retirement income
  • Take the vacation you have been dreaming of, or send your high school grad off to college!

If you are interested in a HELOC or Home Equity Loan, First Bank has options for you!

Click here to learn more about First Banks options for your Home’s Equity.