What is a home equity line of credit – HELOC ?
True Path Loans, Inc.
True Path Loans, Inc.
Published on February 9, 2023
What is a home equity line of credit – HELOC ?

What is a home equity line of credit – HELOC ?

A Home Equity Line of Credit, or HELOC is a revolving loan that you can obtain, based on the amount of equity in your home, and is secured by your home as a second lien.

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How does the HELOC work:

It is a loan against your available equity in your home (between 70-85%) of the value of your home, and is a second lien on your property.

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What is Equity:

This is the difference between what you owe on your home and what the market value is currently.

Variable Interest Rate Option:

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The interest on a HELOC can vary and is calculated using an index and a margin. This means your monthly payment can and will vary every month.

Fixed Interest Rate Option:

The interest on a fixed rate HELOC means that the rate will remain fixed as will your payments.

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Payments:

Typically revolving lines of credit will have an interest only repayment, based on the amount that is withdrawn.  You can pay back the principal at any time, but it may not be part of your interest only repayment.

If you choose the fixed rate loan, your payments will remain consistent based on the principal and interest that will be repaid back every month.

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You can choose to use this line of credit if :

  1. you have a low rate on your first mortgage and you don’t want to refinance this to obtain cash out
  2. you want to use it as a revolving line, where you withdraw what you need, when you need it, and pay it back without prepayment penalties
  3. you want to complete renovations or upgrades to your home and would rather not put on your credit card
  4. you want to consolidate higher interest rate debt
  5. you want cash to have to draw upon when you need a down payment for investing in a new real estate property

 

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What you need in order to Qualify:

  • FICO Credit Score
  • Debt to Income Ratio (DTI): Total Monthly Debt (Mortgage  (PITIA) + Auto Loan + Minimum Credit Card Payments + Student Loan Payments + New HELOC Payment) divided by Total Gross Monthly Income (Before Taxes)
  • Have enough equity in your home (Market Value minus Amount of the Loan that you still owe)

 

Ask True Path Loans about getting cash out of your home equity and see what you can qualify  for!

Call us at 949-243-7900.

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True Path Loans, Inc.
True Path Loans, Inc. Irvine
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