Home equity lines of credit typically involve variable rather than fixed interest rates. The variable rate must be based on a publicly available index (such as the prime rate published in some major daily newspapers or a U.S. Treasury bill rate).
What’s the most common use of equity?
Here are 7 common uses of a home equity line of credit (HELOC):
- Pay for home improvements.
- Pay off credit cards or other higher interest debt.
- Pay for education.
- Fund a vacation.
- Cover medical expenses.
- Use as a down payment for a second home.
- Use as a down payment for rental investment property.
How to choose the best home equity line of credit?
Lenders offer home equity lines of credit in a variety of ways. No one loan plan is right for every homeowner. Contact different lenders, compare options, and select the home equity credit line best tailored to your needs. How much money can you borrow on a home equity credit line?
When do I withdraw money from my home equity line?
Ask how you can spend money from the credit line — with checks, credit cards, or both. You should find out if your home equity plan sets a fixed time — a draw period — when you can withdraw money from your account. Once the draw period expires, you may be able to renew your credit line.
What do I need to know about a home equity loan?
Under the law, lenders must tell you about the terms and costs of the loan plan when you get an application. Lenders must disclose the APR and payment terms and must tell you the charges to open or use the account, like an appraisal, a credit report, or attorneys’ fees.
When do I have to renew my home equity line of credit?
You should find out if your home equity plan sets a fixed time — a draw period — when you can withdraw money from your account. Once the draw period expires, you may be able to renew your credit line. If you can’t, you won’t be able to borrow additional funds. In some plans, you may have to pay the outstanding balance.
