Making some changes around your home is a great way to help you enjoy your home even more. There is so much you could do to improve the living space, the kitchen, bathroom, or even add a garage or a new sunroom. Each of these costs money, and one of the most practical ways to finance your next project is by getting a home equity line of credit (HELOC). Here are some common sense reasons why this could be the best way for you to go. Open An Account A home equity line of credit will enable you to get an account with a credit limit. This will be established by the lender and will be based on your credit score, current indebtedness, amount of equity available, and your ability to pay back the loan. You will be given access to this line of credit by either a credit card or as a checking account. Get One Loan - Many Purposes The money in your account is yours to use however you want. If you have more than one home renovation project and are not sure of the total costs involved, then this is the simplest way to go about it. Or, if you want to do several things with the money - but not all at once, then, again, this is the perfect solution to those needs. Out of the money your receive, you could do things like: Home renovations Consolidate Debt Cover medical expenses Take a vacation or trip College education Buy a car or boat Have emergency money If you wanted, you could even do more than one of these things. A home equity line of credit is usually an adjustable rate loan. This means that after a fixed rate period, the rates will change on a regular basis. The rate is based on the market rate and a margin. Pay Interest Only On Portion You Use One thing that makes a HELOC such a good investment is that you only pay interest on the money that you actually take out of the account. This makes it ideal for more than one project, and gives you the privilege of saving money on the portion you are not yet using. In many cases, you have an option as to how you want to pay on your home equity line of credit. You could pay only the interest each month during the draw period. This period of time gives you a specified time in which you are allowed to take out more money. Another option is to make fully amortizing payments. This payment amount will be calculated monthly in order to keep up with how much you take out. Different Amortization Methods - Pay Attention Lenders have different ways to amortize their HELOC products when the draw period closes. You will need to know the method they will use to avoid surprises. One of these is to calculate fully amortizing payments and give you the balance of the 30 years to pay it off. Another way is to require a balloon payment at the end of the draw period. This means that you will probably need to refinance it. Some newer products simply roll the money over again to make it available to you - even without applying for it. Whichever home equity line of credit you choose, be sure that you do some shopping to find a good deal. HELOCs vary quite a bit among lenders, and so do their terms. Be sure you find out about the margin rates and how it amortizes. About the author: Joe Kenny writes for Rebuild.org, offering home equity loans, they also have some great offers on home refinance for any homeowners looking to release equity. Visit: Loans
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