If you’re reading this, chances are you’re considering a home equity line of credit (HELOC). You’re already taking the first step by looking for information to make an informed decision. Just like any significant financial decision, opening a HELOC shouldn’t be taken lightly. At Amegy, we want you to feel comfortable and at ease with your choice. But before we dive into the topic any further, here’s a quick refresher on what a HELOC is:
In the simplest terms, a home equity line of credit works a little like a credit card—except it’s secured by your home. A lender will approve you for a specific amount of credit based on the amount of equity you have in your home. You’re not required to borrow up to the limit of your credit line, which means you won’t have to advance more than you need. A HELOC gives you instant access to cash to use anywhere and on anything.
So, should you get a HELOC?
Well, it really depends. First, let’s talk about why you could. There are no restrictions on how you spend the money you get from your HELOC, so the possibilities are endless. For example, you can use HELOC funds to cover emergency medical expenses, home improvements or even education costs.(Read about the five smart ways to use your HELOC). If you are facing any of those types of expenses, a HELOC may be right for you.
More benefits of a HELOC include:
- A competitive interest rate, which is usually lower than other forms of credit, like a credit card.
- Option of only paying interest on the outstanding balance monthly during the draw period.
- A possible tax break on the interest you pay on your HELOC. Make sure to consult your tax adviser.
But there may be instances when a HELOC isn’t right for your particular financial situation.
A HELOC may not be right for you if:
- Your income fluctuates and there are times when paying the minimum payment amount is difficult for you.
- Most HELOCs have , which could increase over time. If an interest rate increase would make it difficult for you to make your minimum payments, a home equity line of credit may not be right for you.
- You plan on using your HELOC for risky investments or extravagant spending.
Whatever your financial situation is, we’re here to help you make the right decision.
The information provided is meant for general informational purposes only and does not constitute tax, business or legal advice.