Since you have been spending so much time around the house doing all sorts of projects and organizing various aspects of your life, you may have decided you would like to do a larger home improvement project for your family’s enjoyment or perhaps in preparation to sell.
There are a variety of options you could use to pay for your project ranging from cash, same-as-cash credit offers from vendors or a HELOC.
Since mortgage interest rates are at all-time lows, exploring a HELOC might be a good option if you have lived in your home for a while. A HELOC (Home Equity Line Of Credit) resembles a second mortgage leveraging the equity in your home as an open line of credit extended to you from a lender that acts like a credit card to pay for expenses of your choice.
Generally people use a HELOC for home improvements but that is not a requirement and the money could be used for any purpose.
Getting a HELOC is much like applying for a home mortgage. You need to choose a lender and complete paperwork regarding income, expenses, assets, employment history and your home’s current value.
In order to see how much you qualify to borrow against your property, you will be required to undergo a credit check and have your home appraised in order for the lender to determine you and your home’s credit worthiness.
Once approved, you can use the money a bit at a time when needed or as a lump sum. Repayment terms can differ so be sure to check with your lender on specifics that can be tailored to your individual needs before signing on the dotted line! If you opt for a HELOC, keep in mind that if you default on your loan agreement your home is at risk because it is the collateral for the loan.
However, it can be a beneficial way to borrow money for a designated project at a lower rate than some other types of loans.
If you have some projects you would like to get done while life is happening at a slower pace, check with your lender to see if it is an option for you and your family to get started!
Three things you will need to remember...
- A HELOC requires a disciplined plan for repayment since it is likely to be an interest-only required payment. A minimum monthly payment will not reduce your balance, so map out a strategy prior to closing.
- Many banks offer limited closing fees and no prepayment penalty on HELOCs. Be sure that the closing fees are limited prior to proceeding.
- ...."You've Got A Friend in Real Estate"....
Jarod Tanksley 615.403.8265
Brentview Realty 615.373.2814