HELOC - Your Emergency Lifeline
Unexpected expenses or emergencies can be devastating to your finances. One medical bill can set you back hundreds, if not thousands, of dollars. Even smaller financial problems, such as finding the money to perform repairs after a storm, can leave you without any way to make ends meet. However, if you own your house, you have an emergency lifeline surrounding you: the equity in your home. You can tap into this equity with a Home Equity Line of Credit (HELOC) and use the money however you need.
What is Equity in a Home?
Your house has a market value. Depending on several factors, such as the home's location and the state of the real estate market, your home value may appreciate over tme. When people talk about home equity, it deals with the current market value of your home. Most homeowners take out mortgage loans when purchasing their house. The amount of your remaining mortgage is subtracted from the market value of the house. What is left over is the home's equity. You can borrow against a porton of the equity of your home and use the funds however you wish.*
|Current Market Value of Your Home||$200,000|
|80% of Market Value of your home||$160,000|
|Minus current mortgage balance owed||$120,000|
|Home Equity Available to Borrow||$40,000|
In this example, you would be able to borrow a line of credit up to $40,000 with Financial Access Federal Credit Union.**
Tap into Your Equity with a HELOC
HELOC stands for "Home Equity Line of Credit." Think of a HELOC as a second mortgage being placed onto the house. The lender uses your home as collateral to provide you with the funds you need. With a HELOC, it is similar to a credit card since the available balance replenishes as you pay down the loan.
You can borrow up to your available credit limit for up to 5 years, and you only pay back the amount you actually spend. So even though your limit is $50,000, if you only use $10,000 to pay off a medical bill, you only have to pay back the $10,000 balance. In addition, you shall have the remaining $40,000 to use if you so desire.
In this example, you are only required to repay the $10,000 you utilized of your HELOC. You still have $40,000 available should another emergency or unexpected expense arise.
HELOCs offer flexibility as you don't have to use the total amount that the lender provides to you. In addition, they are usually more affordable borrowing options than other types of loans. First, your home is being used as collateral, making a HELOC a secured loan. Secured loans typically have lower rates than unsecured loans (personal loans, credit cards). Second, HELOCs have longer repayment periods (up to 20 years depending on your credit limit), which helps lower your monthly payment even more.
The Possibilities are Endless
Another great feature about a HELOC is you can use the money for just about anything, such as remodeling your home, paying for college, consolidating debts, or even funding events like a wedding or well-deserved vacation.
However, one of the greatest benefits of a HELOC is that it’s available to use when you need it. Should an emergency or unexpected event take place, such as a job loss or medical problem, you’ll have peace of mind knowing you have the funds necessary to make ends meet. Yet, just like with any credit card, make sure only to borrow what you can reasonably pay back as you don't want to miss any payments.
- Secured by owner occupied residential dwelling, primary residence
- Property location must be within state of Florida
- Lien cannot exceed second position
- 650 Credit Bureau score or above
- Minimum loan amount: $10,000
- Maximum loan amount: $100,000 (total mortgage debt on property not to exceed 80% of property value)
*HELOC Loans will have a maximum amortization of 20 years (240 months). There will be a draw period for the first 5 years. The original term will be based on the amount of HELOC approved. Minimum monthly payments for open-ended loans are based on the outstanding balance after the most recent advance on the line of credit or $150.00, whichever is greater. After the 5 year draw period the monthly payment will be re-calculated based on remaining balance and term.
**Subject to credit approval. Contact us for the most current rate at firstname.lastname@example.org.
ADJUSTABLE INTEREST RATES: Interest rate will be Prime Rate plus margin adjusted semiannually.
Payment will be adjusted during the Interest Change Period or after the most recent advance on the Line of Credit. The payment will not change as the principal balance declines.