Seeing your child in a cap and gown made you swell with pride. Fortunately, since you helped them pay for their education with your Home Equity Line of Credit, they are not burdened with decades worth of student loan payments and you haven’t been browbeaten with interest charges on money you didn’t use. Best of all they’ve learned to make wise financial decisions, just like their parents.
A Home Equity Line of Credit (HELOC) is a smart way to borrow only the money you need, whenever you need it. You only pay interest on the money you’ve taken out, so you can pay some back to avoid high interest charges before you make any further withdrawals. Think of it as a lower-interest credit card with a higher limit.
Another great advantage of HELOCs is that, in many cases, the interest you pay is tax deductible. There are some limits and restrictions to this, so talk to your accountant or tax advisor to make sure that you’re eligible.
You may be able to borrow up to 100% loan to value on your equity (up to $500,000), and HELOCs are now available for home purchases! This gives you greater flexibility when it comes to repaying your home mortgage loan, as well as the ability to use your line of credit to:
- Buy a car
- Make improvements to increase the equity in your home
- Pay off higher-interest debts, such as credit card bills
- Make a down payment on an investment property
- Do just about anything you want with the money!
For the first 10 years, you’re able to make interest-only payments on the loan balance. This allows you to maximize your income, while supplementing it with your line of credit. After that, you can either refinance the loan with no pre-payment penalties, or the balance may be amortized over a 20-year period.
HELOCs also typically cost less to close than other types of home mortgage loans. In some cases you may be able to take out a HELOC with no out-of-pocket closing costs! Contact Homestar Financial, and one of our licensed home mortgage loan professionals will help you decide how to take full advantage of your mortgage options!
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