Common Uses of HELOCs

Wait.  What is a HELOC again?

It is a Home Equity Line of Credit.  Basically, it is a loan that establishes a line of credit (amount you can borrow) based on the equity in your home.  In the end, it functions very similar to a credit card.  You borrow the amount you choose for the purposes you choose when you choose to, with no impact on your current first mortgage.

Many homeowners are looking to take advantage of recent appreciation in the value of their homes.  In the recent past, most homeowners elected to do this with a cash-out refinance.  This was especially true as mortgage rates have remained low.  However, as mortgage rates begin to rise, homeowners are not going to want to give up their ultra-low fixed-rate first mortgage.  Trans-union has projected 1.6 million new home equity consumers in 2018.  Are you one of those people?

Here are some common reasons homeowners take equity out of their home.

Home Improvements:

The money could be used to finance a major renovation project, such as a new bathroom or addition.

Debt Consolidation:

Essentially, homeowners can pay off other high-interest rate debt like credit cards with interest rates often in the 20% range and enjoy a much lower rate on the HELOC.

College Expenses:

Despite all the discussions on how to make college more affordable, it is still the single largest expense for most families just behind the purchase of their home.  The equity in their home could be used to help pay for college.

Refinance an Existing HELOC:

This is another very common reason to take out a HELOC.   Simply to refinance an existing HELOC.  Just like regular first mortgages, you can refinance a HELOC, either by rolling it into a new first mortgage or by taking out a new HELOC altogether.

Emergency Funds:

As a HELOC is a line of credit, many homeowners establish the line of credit to cover unexpected emergencies--before they happen.

Maybe one of these situations applies to you or perhaps there is a completely different goal that you would like to accomplish.  No matter the reason—contact our mortgage specialist at 314-555-6666 for more information today!