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HELOC Home Equity Line of Credit 2023

A Home Equity Line of Credit (HELOC) is a loan that allows homeowners to borrow against the equity they have built up in their primary residence or second home. These types of loans can be a great way to finance a variety of expenses, including home improvements, consolidating debt, or even buying a second home. However, before taking out a HELOC, it’s important to understand how they work.

Get The Cash You Need Without Refinancing

A HELOC is a line of credit, which means that the borrower can draw on the loan as needed, up to a certain limit. The borrower only pays interest on the amount they borrow, and the interest rate is typically adjustable. This means that the interest rate can change over time, based on market conditions.

One of the biggest advantages of a HELOC is the flexibility it offers. Unlike a traditional home equity loan, which provides a lump sum of cash, a HELOC allows the borrower to access funds as needed. This can be especially useful for homeowners who need to finance a large project, such as a home renovation or addition, but don’t want to borrow a large sum of money all at once.

Another advantage of a HELOC is that the interest paid may be tax-deductible, as long as the loan is used to improve or purchase the primary residence. It’s always best to check with a tax professional to see if this applies to you and your situation.

To qualify for a HELOC, homeowners will typically need to have a good credit score, a stable income, and a significant amount of equity in their home. Your debt-to-income ratio will also be a key determining factor in determining qualification.

A HELOC is a Cash-Out Refinance Alternative

Purchase a Second Home or Investment Property
Want to retain liquidity but don’t have a down payment? Leverage the equity in your home to make that purchase.

Affordable home renovations and upgrades by unlocking the equity in their home.

Debt Consolidate credit card and other debt with a home equity loan

Large Purchase/ Family Priorities
Leverage equity for a large purchase, dream vacation or college tuition

Get Rid of your Revolving Credit Card Debt

The Truth About Credit Cards and Home Equity Lines of Credit

According to the Federal Reserve Bank of New York, Credit card balances increased by $38 billion dollars in the third quarter of 2022. This is over 15% more than 2021 and is the largest increase year over year in credit card debt in over 20 years.

According to Money Geek, the average interest rate carrying charge on a credit card is 19.2% and cash advance is over 25%.

The cost of credit, in securing mortgages, auto loans and credit remain significantly higher than it was a year ago. At the same time, Homeowners in need of cash have a significant number of options as there is more equity in residential real estate then ever.

Home equity lines of credit (or HELOCS) along with seconds mortgages should be considered for homeowners that are looking for access to cash to pay off high interest rate credit cards, to purchase another property, or access to your equity.

A HELOC can help with your credit card debt by refinancing your debt at a much lower rate than you are currently paying using the equity in your home so that you end up saving money with a lower payment each and every month.

Our Home Equity Process is Different!

  • Usually we do not require a traditional appraisal.

  • Unlike most lenders, we can lend up to 95% of your home’s value (assuming you meet our minimum credit score requirements).

  • Your funds will typically available within 2 to 4 weeks of initial application.

Use a HELOC as a Piggyback Loan

What is a Piggyback loan?
A piggyback loan is a second mortgage that you take out alongside your first mortgage. It can come in the form of a home equity loan or a home equity line of credit and has a variety of uses. Some ways a Piggyback loan comes in handy:

Purchase or Refinance
Avoid Jumbo Loan price hits & guideline limitations by breaking your loan up into a 1st mortgage and simultaneous piggyback second mortgage

Avoid Mortgage Insurance
Keep your first mortgage at or below 80% of the purchase price, and use a piggyback to cover your down payment to avoid PMI.

Put Less Money Down
Save money on your down payment. Use the money saved for landscaping, new furniture, appliances, etc.

Flexible Future Spending with a HELOC
Write checks for college tuition, home improvement, emergency expenses, or your dream vacation. An adjustable rate HELOC can be paid down at any time.

Purchase a larger, more expensive home or take more cash out of your existing one

Piggyback 2nd mortgages typically allow you more options in purchase or refinance scenarios.

What's the Difference Between a Home Equity Loan & Home Equity Line of Credit?

Home Equity Loan: Similar to a cash out refinance, a home equity loan will provide you with a lump sum of cash; as much as 95% of your home’s equity. It acts as a 2nd mortgage, where a cash out refinance transforms your first mortgage into a completely new mortgage.

  • Receive a lump sum of money upfront
  • Fixed interest rate and a fixed monthly payment
  • Lower interest rate compared to other loan options, such as a personal loan
  • Can’t take out more money for an emergency without another loan

Home Equity Line of Credit (HELOC):
A HELOC is a line of credit that is secured by your home, giving you a revolving credit line to use at your will. It can be used for large purchases such as renovations, tuition, or emergency expenses.

  •  Access to a line of credit up to a certain amount. You choose how much (or how little) to use
  • Variable interest rate — your interest rate could decrease if your credit improves or market interest rates drop
  • Lower interest rate compared to other loan options, such as a personal loan
  • Credit line available for use as you see fit (including emergencies)
  • Interest-only payment options

HELOAN: HELOCs for Investment Properties

If you’re looking for a home equity loan for your investment property, we offer our fixed home equity loan (HELOAN) product.  It’s a 2nd lien that is fully amortized based on the year term selected ((5, 10, 15, 20, 25, or 30yr options available). Product features include:

  • Borrow up to 85% of the home’s value
  • Single Family Residences (SFR), Duplex/2-unit, and Condos permitted
  • Finance up to 10 properties
  • Loan amounts up to $500,000
  • Minimum credit score 640

Renovation Home Equity Loans

While a home equity loan or home equity line of credit (HELOC) lets you borrow against the current value of your home, a Renovation Loan allow you to borrow against the after-renovation value, or future value of your home.

With a Renovation HELOC, you can take your home’s value to the next level:

  • Primary and second homes
  • Loan amounts from $25k to $500k
  • Borrow up to 90% of the post-renovation value
  • Variable rate
  • Multiple draw and repayment periods available

Here are a few of the requirements to getting qualified for a Home Equity Renovation Loan:

  • 640 minimum FICO score
  • Proposed Debt-to-Income (DTI) is 45% or lower
  • You are renovating a primary or second home
  • Your property is not located in Texas
  • You are renovating small projects such a kitchen, bathroom, or ADUs/granny flats
  • You are renovating a single family detached or townhouse. Sorry, no mobile homes or manufactured homes
  • Your main source of income is consistent and predictable
  • Your project is at least $20,000
  • You do not have a recent bankruptcy on your credit report
  • Your property has not been listed for sale in the last six months
  • You have not missed a mortgage payment within the last two years
  • You requested Loan-to-Value (LTV) ratio is 125% or less