How a Home Equity Line of Credit (HELOC) Can Help You Achieve Financial Freedom

The information below is for educational purposes only. 

Let’s talk about the things you pay for. 

First, you have your bills for things like credit cards, student loans, medical expenses and more. Then there are the things you’re looking forward to like home renovations, going back to school for a master’s degree, or starting a business. The list could go on and on. 

Whether you’re focusing on getting out of debt, or making other improvements to your life, the answer could be the same: a home equity line of credit (HELOC). 

Let’s dive into how HELOC rates can help you achieve financial freedom. 

What is a Home Equity Line of Credit?  

A home equity line of credit, commonly known as a HELOC, is an open line of credit where you borrow against the equity in your home. To determine your equity, you subtract the amount you currently owe on your mortgage from the value of your home. 

So, if your home’s value is $350,000 and your current mortgage balance is $250,000, you have $100,000 in equity. That means you could have $100,000 in a home equity line of credit. 

Unlike a traditional mortgage or standard home equity loan, a HELOC is an open line of credit. You can use it repeatedly as needed. 

How Do Home Equity Line of Credit Rates Work?  

Usually, HELOC rates are variable for the entire term of the loan. This means your rate may change from time to time, depending on market conditions.

Some lenders, however, offer fixed rates for a certain amount of time. In these situations, you can rest easy knowing that your rate won’t fluctuate for the first five or 10 years. 

Plus, HELOC rates are usually lower than other types of debt like credit cards, student loans and more. This makes it a good option for a wide variety of uses. 

Using a Home Equity Line of Credit to Get Out of Debt Faster

Since HELOC rates are lower than other types of credit, they can be used to help you get out of debt faster.

Pay Off High-Interest Credit Cards

If you have a large balance on a high-interest credit card, you may refinance it in a HELOC. According to The Mortgage Reports, credit card rates tend to be 10% – 15% higher than HELOCs. You’ll pay less interest over time and may be able to pay it off sooner. 

Refinance Student Loans

If you have private student loans with high interest rates, refinancing them into a home equity line of credit could simplify payments and reduce your costs.

Cover Medical Expenses

You can use your HELOC to pay for required or elective medical expenses. This could include things like infertility treatments, cosmetic surgeries and more.

Other Debt Refinancing Options

A home equity line of credit is versatile and can be used to refinance various types of debt, helping you save money and streamline payments.

Key Factors When Considering a Home Equity Line of Credit  

As with other types of loans and credit cards, there are several considerations when looking for the right HELOC for your needs. Here are a few of them. 

• HELOC Rates: You’ll want to find the lowest rate possible.
• Equity Requirements: Do you have enough to achieve your goal?
• Fixed-rate Options: Some HELOCs come with a fixed rate for a certain amount of time. This means your rate will not change during that pre-determined period. Compare the fixed rates to find one that fits your needs.
• Promotional Offers: you may be able to find an introductory rate or a fee reduction to get you started.

When a Home Equity Line of Credit May Not Be the Best Option  

A HELOC isn’t always going to be the best solution to achieve your financial goals. Here are a few instances where you won’t want to use a HELOC: 

• Other loan options have a better rate or term.
• You don’t have enough equity in your home.  
• You don’t want to borrow against your home’s equity.

How to Apply for a Home Equity Line of Credit  

The requirements for getting a HELOC are like other types of loans. Your credit score and history will play a big role. For a HELOC, you also need to own your home and have equity in it. 

You don’t need to own your home outright. You may have a mortgage on your home and get a HELOC. However, most financial institutions will need to be in the first or second lien position for you to qualify. 

When you apply for a HELOC here is a short list of the documents and information you will need on hand: 

•    Documentation of household income
•    Your Social Security number
•    A recent mortgage statement
•    A property tax bill
•    A copy of your homeowner’s insurance policy

These requirements may vary depending on your lender. Check with them before you apply. 

With most lenders, you can start your application online or schedule an appointment with an expert for more advice.

Frequently Asked Questions About Home Equity Lines of Credit  

Take Advantage of Competitive HELOC Rates Today  

At Veridian Credit Union, we make the process of applying for a HELOC easy. Our rates are great, and we have special offers and intro rates throughout the year. 

Let us help you achieve financial freedom. Click below to learn more about our HELOC options and apply today. 

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