There are many different aspects of financing and mortgages out there with different terms, percentages and qualifications. It is no wonder then that there is some misinformation and misconceptions out there about different forms of lending, mortgages and loans. Here at the BRM Lending Team, we want to clear up some of the common misunderstandings out there regarding a home equity line of credit (HELOC).
- A home equity line of credit is a second mortgage. No, a HELOC is not a second mortgage. A HELOC is actually closer to a credit card, since you are given a line of credit up to a certain amount. You can use as much or as little as you need and make payments to decrease the total amount you owe and lessen your monthly payments. Should you pay the balance in full, you still have the amount you were initially approved for available to you.
- A home equity line of credit will hurt my credit. A HELOC will not hurt your credit, but missing payments on the amount you have borrowed will! In fact, in some cases, a HELOC can help you build your credit by showing you make payments in a timely manner.
- A home equity line of credit is a better way to finance a vehicle. Most HELOC terms are for 10 years or longer, whereas a typical car loan is for 3-5 years. This makes finding a car loan a better option than using a HELOC for your lending option on a vehicle.
- A home equity line of credit is only for putting equity into your home. There is misinformation out there that a home equity line of credit is only for home improvements when, in fact, you can use the funds as you choose. Weddings, vacations, college fees, and more can all be paid for with the funds from your HELOC.
If you have questions about a home equity line of credit and would like to learn if that is a good option for you, please give us a call today at the BRM Lending Team.