The Home Equity Line of Credit - Flexible Borrowing at Affordable Rate
Heloc's Vs standard Home Mortgage Loans
While in most cases a Heloc is a second mortgage which runs alongside a
more traditional fixed rate or adjustable rate home loan, this isn't
always the case. In many cases, if you've already paid off your home
and want to raise funds against it, a line of credit is a very
attractive option. Check out our free Calculator to see how much you can borrow.
Find a Lender Near You
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Both a standard mortgage loan and a Heloc will give you access to cash secured against your home, however a heloc will allow you added flexibility. While it has a fixed credit limit that you can borrow up to, your repayment amounts are based on how much of the credit facility you have actually used. Interest is only charged on the amount you've drawn down on, rather than the total credit limit. With a standard home loan or equity loan you're paying full interest from day one. The result of this is that you're paying a lot less interest than you would on a regular mortgage, with a lot more flexibility.
Pro's and Cons of Home Equity Lines of Credit
While HELOCs are great for many purposes, they aren't without their drawbacks. As with all financial products, a line of credit secured against your home won't work for everyone. Below are a few of the main advantages and disadvantages of this type of borrowing.
Advantages of Heloc's
How to use a HELOC
Home Equity Lines of credit are a great asset to people needing flexibility, or who want access to funds quickly should the need arise. Because the interest rate on HELOC's are higher than standard first mortgages, it makes sense to only use them as much as necessary and pay them back as quickly as you can. Some of the most common uses for these types of loans are:
- To consolidate high interest debt like credit cards and personal loans
- For funding renovations or improvements to the property
- When you have a fluctuating income which can make regular set repayments difficult to maintain
- To pay for one off projects like a wedding or vehicle
Disclaimer: Any and all information provided on this website should be considered an opinion only and does not constitute financial advice. Anyone undertaking any sort of major financial move should get formal, professional advice from a qualified specialist