Velocity Finance - Home Equity Lines Of Credit

Home Equity Lines Of Credit - The HELOC

Here is what you should expect when you apply for home equity lines of credit:

Expect to be approved for a general loan amount - $30k, $50k, $100k, whatever your available levels of home equity and whatever your financial need.
Expect significantly lower rates when compared to traditional home equity loans.
Expect an initial interest-only term where you pay an adjusting rate based only off the money you access - not off the maximum credit line.

The expectations of home equity lines of credit are extremely high - we expect these HELOCs to work wonders for our personal finances, when in reality they are just a more flexible loan.

The flexibility of home equity lines of credit

The main reason behind your choice for home equity lines of credit over home equity loans should be the desire for increased flexibility, the option to access more or less as needed. It should not bee for the lower interest rates because the rates are sure to adjust upward over time, and if its for the initial interest-only period then you must be aware of the upcoming price shock. Flexibility should be all you are after when you apply for home equity lines of credit because as far as benefits go thats about all you're gonna get.

When to look elsewhere

If you know exactly how much you need in your upcoming home loans then your best bet will probably be with a more traditional home equity loan. A home equity line of credit is just like a credit card - you can borrow up to a certain amount, then you get charged interest up the wazzoo until you repay the entire amount. The monthly payments after your interest only term will be much higher than in a home equity loan, where the principal is repaid over the entire loan duration, making it a more steady, more predictable option.