Home equity line of credit

If you need to borrow money to pay off debts or make a major purchase, a home equity line of credit (HELOC) can be useful.  A HELOC is a form of revolving credit secured by the equity in your home.  This is an open ended loan that can be paid down or charged up for the term of the loan, much like a credit card.  The interest rate fluctuates (typically monthly).

With a HELOC, your lender will approve you for a specific amount of credit - the maximum amount you may borrow at any one time under the plan. In determining your credit limit, your income, debts, credit history and other financial obligations will be reviewed.  An appraisal is generally requied to determine the home's market value.  Your credit limit will be based on a percentage of your home's appraised value, which is then subtracted from the balance owed on your existing mortgage.

When you take out a HELOC, you may pay for many of the same expenses as when you financed your original mortgage, such as an application fee, title search, appraisal, escrow fees, and points (a percentage of the amount you borrow).

Most HELOCs have a fixed period (5, 10, even 20 or 25 years) during which you can borrow money against your equity.  Typically, you will use special checks or a credit card to draw on your line.  You'll be making minimum monthly payments – usually an interest only payment of the interest accrued during the draw period.

However, the interest you pay is usually tax deductible and as a CMPS (Certified Mortgage Planning Specialist) Sam Croskell and his TEAM can provide you guidance as to your specific circumstances.  At the end of your "draw period", you will be commence making amorized payments to pay off the loan, making monthly payments of principal and interest.