The 1,2,3s of HELOC Loans
August 25, 2015 | White Rose Credit Union | Financial Wellness
Is a HELOC loan the right loan for you?
For most people their home is their biggest investment, and there are many ways to measure a home’s value. From the safety those four walls provide to the memories of your child’s first steps down the hallway, a home is more than just a property, it is an investment in your family.
How do you determine if or when it is a good time to take a risk on this investment? We are here to help you navigate the process of understanding the benefits of a Home Equity Line of Credit, or HELOC loan and when it is the right time to apply for a HELOC loan.
By definition; a home equity line of credit or HELOC, is a loan in which the lender agrees to lend a maximum amount within an agreed period, called a term, where the collateral is the borrower’s equity in his/her house. HELCO loans are often referred to as a second mortgage.
We have compiled a list of three questions to ask yourself before you apply for a HELOC loan.
Three HELOC Loan Questions to Ask Before You Sign:
Do you have a stable income?
Like your first mortgage, HELOC loans require the payout for upfront costs and application fees along with monthly payments. The application fees can cost hundreds of dollars and if you miss monthly payments a lender may force you out of your home. You will also need to financially prepare for increasing loan rates over the course of the loan as it is rare to secure a fixed-rate HELOC loan.
Why are you applying for a HELCO loan?
HELOC loans are not meant to support day-to-day expenses as this is a high-risk style loan option. However, HELOC is great for large one-time expenses, such as college or to cover the expenses of an unexpected medical bill. Another bonus to this kind of loan is that unlike credit card debt, the interest on your HELOC is tax-deductible.
What is the 3-day rule?
According to federal law, you have three days to cancel a signed credit agreement without any penalty. So long as your primary residence is used as collateral, you can cancel for any reason. Remember, Day 1 begins once you have signed the credit contract, received the Truth in Lending disclosure and received two copies of the Truth in Lending notice, which explains your right to cancel.
Now that you have a better understanding of the risks and benefits associated with a HELOC loan, how do you get the best rate? Our talented team of lending specialists are here to help you research your options and get approved for the best HELOC loan to meet your financial needs.