HELOC you say? What does that mean? The significance of this acronym is Home Equity Line of Credit. It is a loan, such as a mortgage, however the difference is that you do not receive a lump sum but it becomes your access to credit.
Interest rates on this loan can be very enticing. Interest is prime plus. This would indicate that a mortgage interest rate would be higher so this may look more attractive. It would seem that your interest would be substantially reduced.
However, This can be a very dangerous situation if you are not going to pay off the loan for a substantial amount of years. The rate may now be low compared to your mortgage rate but the prime can and has lived very volatile periods.
When you decide you want this type of credit be sure to ask some of the right questions. Most of them have to do with interest rate. Prime is variable but the prime rate varies each day. However, the prime plus rate of interest on this type of loan is not divulged very easily. One must ask. If you do not you may be in a situation that this credit is costing you a great deal of money.
Needless to say the borrowing institution would like you to request a high amount for your line of credit. They want as much interest as they can. It is possible that they will establish a minimum so be sure to inquire. Paying interest on money that you are not using or need is not a good situation.
As in all types of loans there will be fees. However this loan has some special fees and you should be ready to factor these amounts into your cost for the loan. For the first year some of these fees may be waived such as the annual fee. A cancellation fee may exist and it may be waived if your account has been opened long enough. Before any decisions are made ask questions. You may want to know if there is a rate for an initial period of time, is there a minimum that they expect you to take out, what is the margin, is there an average balance, do they have upfront third party and lender costs, and are there yearly fees or fees for cancellation?
When considering this choice you should remember that this loan is given to you using your home as equity. It is possible that with a turbulent economy the approved amount will not be honored by the lender because your property value has decreased. Never forget this is a secured loan, which puts your property at risk.
Interest rates on this loan can be very enticing. Interest is prime plus. This would indicate that a mortgage interest rate would be higher so this may look more attractive. It would seem that your interest would be substantially reduced.
However, This can be a very dangerous situation if you are not going to pay off the loan for a substantial amount of years. The rate may now be low compared to your mortgage rate but the prime can and has lived very volatile periods.
When you decide you want this type of credit be sure to ask some of the right questions. Most of them have to do with interest rate. Prime is variable but the prime rate varies each day. However, the prime plus rate of interest on this type of loan is not divulged very easily. One must ask. If you do not you may be in a situation that this credit is costing you a great deal of money.
Needless to say the borrowing institution would like you to request a high amount for your line of credit. They want as much interest as they can. It is possible that they will establish a minimum so be sure to inquire. Paying interest on money that you are not using or need is not a good situation.
As in all types of loans there will be fees. However this loan has some special fees and you should be ready to factor these amounts into your cost for the loan. For the first year some of these fees may be waived such as the annual fee. A cancellation fee may exist and it may be waived if your account has been opened long enough. Before any decisions are made ask questions. You may want to know if there is a rate for an initial period of time, is there a minimum that they expect you to take out, what is the margin, is there an average balance, do they have upfront third party and lender costs, and are there yearly fees or fees for cancellation?
When considering this choice you should remember that this loan is given to you using your home as equity. It is possible that with a turbulent economy the approved amount will not be honored by the lender because your property value has decreased. Never forget this is a secured loan, which puts your property at risk.
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