When you are looking over your household finances, you probably come across a lot of acronyms. APR, FDIC, IRS--the list goes on and on. However, there is one acronym that you will want to know for sure, that acronym is HELOC. Let us show you what a HELOC is, and how it can make a big difference in your everyday life.
The letters HELOC stand for Home Equity Line Of Credit. A HELOC is a type of loan that you take out based on the equity you have in your home. Unlike a regular, cash-out refinance that comes with a fixed dollar amount, a HELOC is an open line of credit from which you can borrow at any time.
In most cases, a HELOC is a type of second mortgage. Essentially your lender would advance you up to a set amount, which is agreed upon based on your equity in the home in your ability to repay. You will have a set draw period, which is an amount of time from what you can use the line, and then a repayment period of which the limit will be repaid. In most cases, the draw period is around 5 to 10 years, and at this time you will usually just be paying the interest. After that, repayment may last approximately 10 to 20 years during which you will make payments equal to the initial draw spread out over time. While there are many cases in which the HELOC is useful, it is especially beneficial for those working on renovating a home, as it allows the homeowner to access cash as needed to make repairs or purchase additional items for the home.
Remember, just like anything having to do with a second mortgage or refinance, every situation is different. If you would like more information about HELOC, contact First Liberty Financial Mortgage in Louisville Kentucky today. We look forward to working with you.