Getting Cash With A HELOC To Improve, Upgrade, Or Redecorate Your Home

Congratulations on wanting to beautify your home. Whether you want to upgrade the kitchen, remodel the bathroom, get a new roof, buy new furniture, or even add a new pool. A home equity line of credit (HELOC for short) can give you almost instant access to all the cash you need.

With a home equity line of credit you can tap the equity in your home up to 100% of its value.

Here is the beauty of the HELOC:

1.        Because it is a revolving line of credit you only pay only on the amount used not on the credit limit.

2.        Most lines of credit offer interest only payments for the first 5 to 10 years.

3.        You can use the cash for anything you want.

4.        The fees are very limited or you may be lucky enough to get a free HELOC. 

5.        You may be able to get introductory rates as low as 1.99% for the first 6 months.

6.        A credit card or checks will be given to you to use at your leisure.

7.        The interest is tax deductible. (consult your tax advisor)

Almost all HELOC’s are tied to the prime interest rate which is controlled by the Federal Reserve. So your interest rate will fluctuate up and down as the Federal Reserve adjusts this interest rate. There typically is no limit or caps on how high or low the interest rate can go. 

If the fluctuation’s in rates scares you to death, you should look for a HELOC that has a conversion option. In other words at anytime you can convert the loan from an adjustable to a fixed interest rate. Be forewarned that normally when you do convert it. You will no longer have the option to use the HELOC. Your only option will be to pay it back.

The interest rates on the HELOC can range from the prime interest rate up to 6% above the prime rate. There are two things that will affect the rate. The first is your credit score. The higher your credit the lower your rates will be. The second thing that affects the interest rate is how much you are borrowing. The more you borrow the higher your rate will be.

As an example for the above let’s assume you have good credit.

A line of credit to 80% of the value of your home you might pay prime interest rate only.

A line of credit to 85% of the value of your home you might pay prime plus 3%.

A line of credit to 90% of the value of your home you might pay prime plus 5%.

A line of credit to 95% of the value of your home you might pay prime plus 8%

A line of credit to 100% of the value of your home you might pay prime plus 10%.

You are now ready to start shopping for a home equity line of credit and get access to all that cash that’s sitting in your home.