How Does a HELOC Work?
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When you need some extra money to make a big purchase, remodel your home, or pay the balance on a high-interest credit card, a HELOC (home equity line of credit) may be just what you are looking for. Using your home equity as collateral, a HELOC is revolving credit. This is an open-ended loan that may be paid down or charged up for the term of the loan, similar to a credit card. The loan interest rate usually changes monthly
With a HELOC, the lending institution approves you for a predetermined amount of credit - the highest amount you are able to borrow at any given time with the agreement. In determining your credit limit, your salary, debts, credit status and any other monetary circumstances will be considered. So that the lender can assess your property's present market value, you're going to need an appraisal on your home. Your credit limit will be set considering all of the above, as well as a percentage of your home's appraised market value, which is then subtracted from the balance owed on your present mortgage.
At Homewood Mortgage, Inc., we answer questions about Home Equity Lines every day. Call us at 205-941-1484.