HELOC Lenders

Before we get started, we need to understand what the abbreviation ‘HELOC’ stands for. The acronyms stand for Home Equity Line of Credit or simply Home Equity Line. This is a revolving line of credit that is based on the equity of a borrower’s home. Instead of the borrower borrowing money in a lump sum, they open a credit account that operates in just same way a credit card account operates. A majority of home owners prefer taking out HELOC loan products due to the fact that it has low interest rates, offers higher limits and allows them to draw as much or as little money as is needed. How large the amount of HELOC loan that HELOC lenders are willing to offer depends on the value of an applicant’s home.

Generally, HELOCs are tax deductible and have fixed repayment terms. There are various reasons as to why a person may apply for a HELOC loan, for instance for paying off  credit card debts, for home remodeling purposes, funding their college education, for home improvement purposes, for financing a wedding event and so forth. Homeowners especially love these types of loan products because they only pay interest on what they borrow. For instance, if your home’s original purchase price was $225,000 and over the years it appreciates to something like $350,000, along with the original figure ($225,000) on the first mortgage, the homeowner may be able to obtain $125,000 line of credit. Interest rates on this line of credit are usually variable; with some HELOC lenders providing the borrower (generally the homeowner) has the capability to convert to a fixed rate of interest at some time in future.

How do HELOC lenders settle on those who qualify?
To be eligible for a HELOC loan facility, the applicant must meet the credit worthiness standards as set by the HELOC lenders approached. This might include such things as, a good credit score, applicant’s employment status, and debt to equity ratio of their property. Now assuming that a borrower is credit worthy as per the minimum qualification requirements set by the HELOC lenders, then the loan limits determines the amount of HELOC loan that can be granted.

The loan’s limit is normally based on the value of an applicant’s home equity that is available at the time of the loan’s request. This is the difference between the appraised value of the home and what the borrower owes on the home. The loan limit is calculated by getting the home equity value and multiplying it by a set percent, typically 80%. Generally speaking, HELOC financial assistance can come in handy in time of financial emergencies. Moreover, Home Equity Line of Credit (HELOC) doesn’t have closing costs, making them a loan of choice to many homeowners. Actually these loan types can really save the homeowner a lot of money due to the fact that most don’t have closing charges.

Chargeable interest rates
Most HELOC lenders offer reasonable rates of interest to those who avail this type of a loan product. Generally HELOC loan products have lower rates of interest when compared to other traditional loan products. This makes them an excellent alternative of solving short-term financial needs that can’t wait. The interest a borrower pays each year in a HELOC repayment plan is tax deductible. At the end of the day, this results to lower payable interest rate. Nevertheless, if a borrower defaults on the loan’s payments, then he or she risk their losing their home to the HELOC lenders they were dealing with.

Thus, before approaching HELOC lenders with the intent of getting a HELOC loan facility, it is vital that the borrower think in advance of the various ways they could make use of the loan proceeds. These types of loans are not suitable for the purchase of luxury goods. Purchasing a new home is always a good way of making use of the loan’s proceeds. However, it is essential that a borrower understands his or her finances and the other available financing options, so as to ensure that the chosen alternative is their best fit and which they are capable of effectively keeping their commitment to.

In summary, the optimum limit of funds that can be acquired from a home loan mortgage increases with the passage of time and this extra potential can always be tapped into for some additional funds in the form of a HELOC loan. HELOC lenders give out further loans by utilizing this extra increase in the value of the borrower’s home.