5 Questions About Home Equity Answered
Picture this: You finally make the exciting leap to start house hunting. You meet up with your realtor, see a few houses in the perfect location… And quickly realize there’s an inventory shortage and housing values are higher than you expected.
More and more people are getting outbid or having a difficult time finding the right home. And let’s be honest, it’s stressful.
Have you considered staying where you are and renovating your current house to get your dream kitchen or backyard oasis?
A Home Equity loan or line of credit can help you make these improvements and add value to your current home, but it can be a confusing topic and it often leads to a lot of questions.
Luckily, Honor Credit Union is here to help! Let’s introduce Kim O’Donoghue.
Kim is Honor’s Assistant Vice President of Real Estate Sales. Her background in lending goes back to 2005. Her goal for Honor’s Real Estate team is to help members set financial/housing goals and find a way for them to reach those goals.
We sat down with Kim to talk about the questions most people have about a home equity line of credit.
Question: Many of our members might be considering opening up a home equity line of credit to remodel the guest bathroom or finish that spare bedroom in the basement for visitors.
So, let’s start there – what is a home equity line of credit?
Answer: A home equity line of credit (sometimes referred to as a HELOC), is set up as a revolving line of credit with a maximum draw amount that is secured by your home.
Question: I’ve heard of a home equity loan, but I’m not as familiar with a home equity line of credit. What is the difference?
Answer: A HELOC is a revolving line of credit, meaning you have a set credit limit and as you pay the loan down, those funds become available again. HELOC’s function very similar to a credit card. A Home Equity Loan, by comparison, is a closed-end loan that has a fixed term, fixed payment amount, and loan funds are disbursed at time of loan and are not accessible as the loan is repaid. We offer both options at Honor – and we would be happy to find the best product for our member’s needs.
Question: Besides home remodeling, are there any other uses for a HELOC?
Answer: Absolutely, HELOC’s can be used for a variety of reasons. While the most common reason is for home remodeling projects or additions, it can also be used for college tuition, debt consolidation, the purchase of second or vacation home, weddings, or even kept as an emergency fund for peace of mind. There are other potential uses as well, such as major medical expenses, vehicle repairs, or even major purchases that you don’t want to put on your credit card.
Question: How can a member decide if a HELOC is the right choice for the project?
Answer: A HELOC is a great product if you’re looking to do multiple projects or would just like to have some emergency funds on hand. HELOC’s also have flexible payment options and typically offer the lowest payment of any home equity product. But, I would recommend that members reach out to us if they have any questions about using their home’s equity and we can help them figure out the best product for the project.
Question: Is it easy to apply for a HELOC? Where is the best place to start?