A home equity line of credit (HELOC) also known as a second mortgage is a line of credit that uses the borrower’s home as collateral for the loan. This makes a revolving line of credit available to the borrower, allowing for periodic borrowings and subsequent repayments.
The HELOC loan is popular with many homeowners. Below are the advantages of a HELOC loan.
In a HELOC, the financial institution and borrower enter into an agreement in which the institution lends money to the borrower up to a predetermined amount within a certain time period. This is different from the reverse mortgages you may have heard of on television.
In a HELOC, the borrower is not given the whole loan proceeds right away. Instead, the borrower can access a revolving line of credit whenever needed up to but not exceeding the predetermined amount. If you are thinking this is similar to a credit card, you are correct.
With a HELOC, you are authorized to borrow up to a certain amount, just like with a credit card. The time period of the loan is usually between five to 25 years. You are only required to repay the amount you borrow plus interest.
The following are interest rate options for a HELOC provided by Meridian Mortgage.
With a HELOC, the interest rate will vary depending on when the borrower accesses their credit line. This is different from conventional loans in which the interest rate is fixed at the time the loan is made.
HELOCs are best for major needs that come up occasionally, such as reducing credit card debts, paying for home improvements or paying for college tuition. Upfront closing costs are usually low for these types of loans.
To qualify for a HELOC, a borrower has to have available equity in their home. This means that the amount the borrower owes on their home is less than the value of their home. A borrower may borrow up to 85% of the value of their home minus the amount they owe. Other qualifying factors are similar to a home mortgage including credit score, employment history, monthly income, monthly debts and credit history.
For more information on applying for an HELOC loan, contact Meridian Mortgage at 317-968-9500 or contact us online.
Meridian Mortgage Solutions is a subsidiary of Endeavor Capital, LLC Licensed through the Indiana Department of Finance and Insurance. License #17519 & 17520, NMLS#222524
Endeavor Capital, LLC and its DBA's are not acting on behalf of or at the direction of HUD/FA or the Federal government.
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