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Top Questions to Ask...

How Long is the Interest Only Period for?

Is there a Prepayment Penalty?

Are there any Annual Fees?

Can I Redraw on the line at any time?

Always Ask for a Good Faith Estimate!

Using Your Home Equity...

A homeowners equity is one of the most valuable resources for obtaining access to capital for many of life's situations - both expected and unexpected. The popularity behind the use of such equity involves lower interest rates than unsecured personal loans, large credit lines and a possibility for a tax deduction of the interest paid (check with a financial advisor as there are restrictions on the tax deductibility of such interest however most people should enjoy this benefit)

Common Uses for Home Equity Lines...

The most common use of proceeds from a home equity line is debt consolidation however smart consumers should also recognize the advantages of having access to a large line of credit for many of life's unexpected events. Imagine having an open line of credit for $250,000 where you pay no annual fees, no monthly payments (if your balance is zero) and enjoy an interest rate that is at prime. It is very possible if you have enough equity in your home.

Question :

Why Would I Want Such a Large Line of Credit

Answer :

There is an old expression "Banks will only loan you money when you don't need it". Any homeowner who has experienced financial difficulty in the past can understand this so it only makes sense to qualify for a home equity loan when you don't need it - just in case you do someday. For the most part, once you approved and your home equity line is funded then at any time in the future you can draw against the available credit. Unlike credit cards, mortgage lenders do not review your credit monthly and adjust your credit limit randomly. The line of credit you started with is the line of credit you will always have - until you close it by selling the property or refinancing a mortgage.

Home Equity Options Available...

Home Equity Lines are the most popular program but many consumers also prefer a fixed rate Home Equity Loan (also known as a Second Mortgage).

What is the Difference?

A Home Equity Loan (aka Second Mortgage) is very similar to a first mortgage. These programs allow you to access some of your home equity and generally involve a fixed payment schedule for the term of the loan. The downfall is you do not have the option of re-drawing against your loan as principal is paid down.

A Home Equity Line (HELOC) works similar to a credit card or line of credit where you only pay interest on the amount of the credit line used. This is a revolving credit line where you can draw from, pay down and re-draw from without having to qualify again.

Questions to Ask

We try to group all questions for home loan programs into two (2) categories.

Ask Yourself...

Would you prefer a fixed rate over an adjustable rate?
Do you plan on using all the proceeds right away or simply want an emergency line of credit?
Do you have the self discipline not to draw against an open line of credit for frivolous uses - Essentially, do you manage debt responsibly?

Ask Your Lender...

How long is the interest only period for?
Is there a Prepayment Penalty?
Are there any Annual Fees?
Can I Redraw on the line at any time?
Is there a maximum to how much the interest rate can increase?
How will you have access to the line of credit?

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