April 17, 2019
Have you ever wished that you had a more substantial backup plan for your finances—one that you could really count on, control and manage — all without detracting from your other financial responsibilities? If you’re a homeowner, a home equity line of credit (HELOC)* could be just what you’re looking for. You get access to a significant level of funds for an extended period of time, with the power to decide when and how you use that money.
But Really, What’s So Special about a HELOC?
A HELOC, or home equity line of credit, is essentially a revolving credit account with an upper limit just like a credit card. The difference is the limit is tied to the value of the equity you have in your home. You can use the whole amount, a portion of the amount or none of it, and you make monthly payments based only on the portion you actually use.
A HELOC can be a valuable financial resource when used wisely. Homeowners like them because of their versatility and the advantages they offer versus other types of loans and credit cards.
Here are a few perks to keep in mind:
HELOC credit lines allow you to borrow large amounts of money. While a credit card may set your credit limit at a few thousand dollars, a HELOC’s upper limit typically equates with about 80 percent of a home’s value minus the balance owed to the mortgage holder. On a home valued at $300,000, with $100,000 still outstanding, that figure could be as high as $160,000.
HELOCs let you decide when, how and whether to use the funds secured. Once you open your HELOC, you have access to your credit line’s full amount. You can use what you need, but your payments are based only on what you actually use. If you need $20,000 of your $140,000 available, for example, payments are calculated only on the $20,000, not the other $120,000 that you haven’t touched.
HELOC interest rates are usually lower than credit card interest rates. Credit cards tend to have higher interest rates because they are unsecured debt. With your home’s equity serving as collateral, HELOCs usually come with lower interest rates than what you’d pay on most credit cards—a real advantage when you take into account the higher sums of loaned money involved.
HELOC interest for qualified home improvements stays tax-deductible in most cases. For example, if you need $50,000 to add an in-law suite to your home, the resulting $2,000 or so in interest could go toward your itemized tax deductions. Always consult your tax professional to see what applies to your specific situation.
HELOCs allow you to consolidate debts on more favorable terms. The higher amounts of credit available with a HELOC, the lower interest rates, and the longer draw and repayment terms eliminate the problem of multiple high-interest credit card bills demanding payments at the same time.
HELOCs can balance cash flow for short-term, large-ticket debts. Financial timing can be an issue for large expenditures even though you know they’re inevitable. For example, you may have money set aside for an expense, but you just don’t have access to it yet without penalties — an IRA, for example, for educational expenses. A HELOC could help you pay that tuition now, and then pay off the HELOC when you have access to other funds, without penalties.
HELOCs are designed to handle multiple expenses over the draw period. One month, you may need $8,000 to pay medical expenses. Six months later, you may need another $13,000 for a new roof. A year later, you may need another $4,000 for an engine overhaul. A HELOC comes with disbursement options that let you pay for whatever you need.
HELOC funds are available at any time. Costly crises have a habit of striking when you least expect. With a HELOC, the funds in your line of credit are already approved and available for your use. As long as the amount is within your line of credit’s limit, it’s yours to use as you see fit.
La Cap’s HELOCs in Louisiana
Life is unpredictable, but with a HELOC from La Capitol, you can make its expenses more manageable. If you’re interested in learning how a La Cap home equity line of credit could work for you, stop by a branch today, or apply online. Let your home’s value and La Cap work for you.
NMLS # 411413
*HELOC interest rates are variable, based on an index plus a margin and may vary after the account is open. The index is PRIME as published in the Wall Street Journal. The rate effective on the first day of the billing cycle will be based on the index as of the last day of the preceding month. The APR range is 5.50% to 18.00%. The rate is subject to adjust monthly. The margin will be based on your credit score, debt ratio, and loan to value – see lender for additional details. There is an annual fee in the amount of $60 which is waived the 1st year. The minimum loan amount is $10,000 with a required initial draw of $1,000. Twenty-four draws (6 per quarter) are allowed annually, with a 5 year draw period and a 10 year payback equaling a 15 year term. Monthly payments are 1.50% of the principal balance during the draw period and amortized to payoff in 10 years when the 5 year draw period is over. Property insurance with La Cap listed as lien holder is required, as is flood insurance if applicable. Loan to value allowed up to 80%. Higher loan to value will be determined on an exception basis. Closing cost will be $0.00 to $900. Closing cost does not include full appraisal fee if appraisal is required. La Cap will pay the closing costs; however, these costs will be charged back to the borrower(s) if the HELOC is closed within twenty-four (24) months of origination. Other restrictions may apply.