A home equity line of credit, or HELOC, enables homeowners to borrow against the current equity in their house. As a revolving variable rate line of credit, a HELOC lets homeowners borrow money as they need it, up to their limit, with flexible repayment terms.
The Benefits of a Home Equity Line of Credit
Borrowing flexibility
This is the biggest benefit of a HELOC over fixed rate loan products like personal loans or home equity loans. Similar to a credit card, with HELOCs, homeowners get credit limits against which they can borrow any amount at any time. HELOCs are a “revolving” type of credit, which means homeowners have the flexibility to borrow money from their line, pay it back, and repeat as needs arise.
Generally, a homeowner’s borrowing limit can be about 65-85% of the equity in their home, minus any other outstanding loans against it, such as a primary mortgage.
Spending flexibility
A homeowner can use the money from a home equity line of credit for most purposes. Common uses include home repairs and remodeling, college tuition and debt consolidation.
Low or no closing costs
Home equity lines of credit may have low closing costs or even none at all.
Low interest rates
Because they are secured by your home’s equity, HELOCs tend to have lower rates than unsecured loans like credit cards or personal loans.
Interest compounds only on amount used
If a homeowner takes out a fixed-rate loan, they pay interest on the entire lump sum they receive from the first day of the loan, whether or not they use it all right away. With a home equity line of credit, homeowners pay interest only on the amount they draw and only from the date the funds are withdrawn.
No cash withdrawal fees
Most lenders do not charge fees for drawing cash from a HELOC, unlike the fees usually charged by credit card companies for cash advances.
Repayment options
Repayment options are flexible with a home equity line of credit. This type of loan may allow an initial period of interest-only payments.
Common Uses for a HELOC
Funds from a home equity line of credit can be used for any purpose, but most borrowers use them to pay for major expenses or debt consolidation.
A HELOC can be an excellent, low-cost source of funding for major home repairs or for renovations — updating, adding a room, a pool or a deck, new appliances, etc. They can also fund major non-home-related expenses such as weddings or college tuition.
A HELOC can also be a useful option for paying down high-interest debt because of the low interest rates offered by this secured loan. Paying down high-interest loans with a lower-interest loan can help homeowners save money and and potentially get out of debt sooner. It can also simplify their finances by consolidating multiple payments per month into just one.
FourLeaf Federal Credit Union Home Equity Line of Credit
A FourLeaf HELOC allows members to borrow against the equity in their homes with a flexible revolving credit line.
A FourLeaf HELOC provides members with:
- No application or appraisal fees.[1]
- The flexibility to use their available line of credit as needed during a 10-year draw period.[1]
- The option to make interest-only payments during the 10-year draw period.[1]
We make it simple to apply for a FourLeaf HELOC. Why not explore this flexible, low-cost loan option today?
FourLeaf does not provide tax, legal or investing advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or investing advice. You should consult your own tax, legal and financial advisor before engaging in any transaction.
All loans are subject to credit approval, membership and loan program requirements. Not all applicants qualify for the lowest rates and may be offered credit at higher rates or with different terms. Hazard insurance and, if applicable, flood insurance is required. Borrowing limits apply based on your home’s value. Home loans are not available in Texas. Conditions and restrictions may apply. Rates, loan programs, terms, and conditions are subject to change without notice.
[1] The standard APR is variable based on the U.S. Prime Rate as published in the Wall Street Journal, plus a margin (if applicable) and is subject to increase after consummation. The current standard APR is as low as 7.00% as of --/--/--. Not all applicants will qualify for the lowest rate and may be offered credit at higher rates and other terms based on creditworthiness. The minimum floor APR is 3.25%. HELOC rates may not exceed the maximum legal limit for Federal credit unions (currently 18%). The Prime Rate as of --/--/-- = 7.00%. Rates shown are based on a borrower’s primary residence, a maximum CLTV of 65%, a minimum initial draw of $25,000 taken at HELOC account opening†, and automatic payments‡ made from a FourLeaf personal savings or checking account. For Closing costs, see [3] below.
† Initial Draw of $25,000 or more: The APR includes a 0.25% discount if a Variable Rate Advance of $25,000.00 or more is drawn at account opening and the outstanding balance is maintained for at least twelve (12) consecutive months. The APR will increase by 0.25% if at any time your outstanding HELOC balance falls below $25,000.00 within the first twelve (12) months of account opening.
‡ Automatic Payments: The APR includes a 0.25% discount if your monthly HELOC payments are automatically withdrawn from your FourLeaf savings or checking account. The APR will increase by 0.25% if at any time your monthly HELOC payments are no longer automatically withdrawn from your FourLeaf savings or checking account.
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