Here at the BRM Lending Team, we want to help you achieve your long-term financial goals, and one popular strategy is to take out a home equity line of credit. In this article, we’ll go over some key information you need to know about this type of loan and what it involves to help you make the best decision for your needs.
- What is a home equity line of credit? Home equity refers to the value of a homeowner’s interest in their home, or to put it another way, the current market value of the home minus the amount still owed on the mortgage. A home equity line of credit, then is a form of revolving credit in which your home acts as the collateral.
- How does a home equity line of credit work? The next thing we want you to know about home equity lines of credit is how their limits are calculated, and how you will be expected to repay them. In general, lenders will use a percentage of a home’s equity to set the credit limit for this type of line. They will also take your credit history and other financial obligations into account when determining your credit limit. Many home equity lines of credit have a predetermined period (such as 10 years) in which you can borrow money, after which you can choose to renew or not. After this draw period, some plans require the balance to be paid in full, while others have a fixed repayment period in which you can pay off the balance gradually.
- Is a home equity line of credit right for me? If you want to figure out whether a home equity line of credit is the best option for your needs, we encourage you to speak to our team. Our team will take the time to thoroughly go over your immediate needs and long-term financial goals, then put together a customized action plan to help you achieve them. Whether that plan includes a home equity credit line or not, you can count on us to give you a wealth of options to choose from and customize our services to your particular situation.