A HELOC, or Home Equity Line of Credit, is a great way to turn the equity in your home into cash you can access as you need it.

A HELOC is like a second mortgage that gives you access to cash based on the value of your home. You can draw from a HELOC and repay all or some of it monthly, somewhat like a credit card with a large balance and much lower interest rate. With a HELOC, you borrow against your equity, which is the home’s value minus the amount you owe on the primary mortgage.

HOW MUCH CAN I BORROW? Typically, a HELOC lets you borrow up to 80% of the home’s value minus the amount you owe on the mortgage. If your house is free from mortgages you can borrow up to 65% of the value of the house.

THE BENEFITS OF A HELOC? A HELOC gives you financial flexibility because the cash is available but you only use it as you need and repay as fast as you wish. There are no restrictions on the use of funds. Many people use a HELOC for debt consolidation, or to pay off lines of credit or credit cards with higher interest rates. It’s a great tool when you use it to improve your house, to buy investment property or to become a private banker. A HELOC offers low or non-existent closing costs and some packages even include free appraisals and legal costs. A HELOC also allows you to get access to funds without refinancing your mortgage and paying a penalty. You can refinance your mortgage later when it reaches maturity.

HELOC VS HOME EQUITY LOAN Both a HELOC and a Home Equity Loan give you access to funds based on the equity in your home. The main difference is the terms of the arrangement. With a Home Equity Loan, you receive a lump sum of cash much like you would with a traditional loan and you make payments to repay the loan as per your personalized home equity loan agreement. With a HELOC, you receive a line of credit which allows you to access funds as you need it. If you don’t need to use it, there is no interest or repayments. A HELOC is a great option if you aren’t sure exactly how much you will need or if money will only need to be accessed in smaller amounts over a period of time. – Text by Tamara Tkachuk, www.bayviewfs.com

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