The full form of
HELOC is home equity line of credit. As the name would suggest this is one loan
where you would be able to use equity in your home as collateral and borrow up
till a certain amount. This amount is not what can be called a predetermined dollar
amount. Thus in a way a HELOC is a lot like a credit card. There is a credit
limit and you would be able to borrow against this loan. This is why so many
people want to take a home
equity line of credit these days. The specialty of this loan is that you
can pay either the whole balance or parts of the same.
Once you have paid
up the balance you are well within your limits to borrow yet again till the
credit limit. Normally in these loans, the rate of interest varies with regards
to the prime rate. There are certain ways in which a HELOC works. The first
five to 10 years of a HELOC are referred to as the draw period. This depends on
the lender in question. The home equity line of credit mortgage has become
rather popular nowadays. It is in this draw period that you can borrow from a
HELOC.
In this period the
minimum payments needed to be made in a month are the ones related to interest.
This means that in this period you can get away by just paying the interest. It
is when the draw period comes to a close that does the repayment period begin.
Normally you have 20 years in which to complete this process. In this period
you need to pay the principle as well as the interest. It is these facilities
that have contributed to the immense popularity of the home
equity loan line of credit.
This means that at
the end of this period the entire loan is paid back. If your home’s value is
increasing, has a decent credit record, and earn enough regularly to make
payments each month against what you have borrowed you can easily get a HELOC.
For more information on home equity, lines of credit please visit Mortgagerefinancebadcredit.com
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