HELOC

Have you been thinking about a HELOC, aka a home equity line of credit? With favorable 30-year refinance rates and California home loans offering many options for refinancing or using the equity in your home, you’ve got a lot of choices to meet your financial goals. Many people choose a HELOC to pay off high-interest credit card debt, or other personal loans. This is just one use of a HELOC that can meet your financial needs.

Why choose a HELOC instead of a refinance or traditional second mortgage?

A home equity line of credit (HELOC) is different from a home equity loan or a home mortgage refinance. With a home equity line of credit, you have credit available for your use as needed. Once you use the credit, whether for home remodeling and improvements or other needs, like college tuition or a down payment on a vacation home, you’ll pay the funds you use back with interest. You can pay the amount back that you use from your HELOC in different amounts: your HELOC will have a variable and adjustable interest rate, similar to an adjustable-rate mortgage (ARM).

If you want a line of credit with interest rates that are usually much lower than unsecured credit cards, a HELOC offers access to funds that you can borrow, use, and repay on a flexible schedule. Most people choose a HELOC because it offers flexibility and availability, along with lower, yet adjustable, interest rates.

Is the interest on a HELOC tax-deductible?

If you use your HELOC to improve your home or make home repairs, yes it may be tax-deductible (you need to check with a licensed CPA or tax attorney for your specific situation). If you use the HELOC for other purposes, it probably won’t be deductible. You should consult a tax advisor before using a HELOC to determine what you can and cannot legally deduct from your taxes.

What financial situations aren’t right for a HELOC and which ones are?

A home equity line of credit is secured by the equity in your home. It’s a form of a second mortgage. If you’re struggling to pay your bills, a HELOC isn’t a smart financial choice.

If you’re financially stable and want financial flexibility and low-interest access to credit, a HELOC can be a wise financial choice. One of the best reasons to work with an experienced independent mortgage broker and a home loan professional is their ability to compare different HELOC lenders and their terms and conditions and advise you on your options. Also typically your monthly payments are a lot lower on HELOC-used funds since the only payments required are typically interest-only payments.  You can use a HELOC to remodel your home, make improvements, or use the money flexibly to meet your other personal financial, business, and family goals.

Sources

https://www.nerdwallet.com/blog/mortgages/heloc-home-equity-line-of-credit/

Using terms from a home mortgage and loan refinance categories

additional source added by FK

https://www.schwab.com/resource-center/insights/content/is-interest-on-heloc-still-tax-deductible

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Do you spend your days watching home remodeling shows? There are dozens of popular shows, each with its own style and approach — not to mention an entire network, HGTV. Add in YouTube and the possibilities for your kitchen and bathrooms are endless. If you’re a DIY type, you may be able to make your remodeling dollars stretch, but most people who’ve started a kitchen or bathroom remodel appreciate professional help.

Think in cost per square foot, not total

First things first: start thinking like a developer or contractor. While the total cost of your kitchen and bathroom remodel is important, you’ll want to fit your project into cost-per-square-foot ranges. According to HomeAdvisor, the average kitchen remodel costs $150 per square foot. So, if your kitchen is 200 square feet, the total project will cost $30,000 — on average. You can get prices as low as $75 per square foot, but this comes at a cost: the materials will be of lower quality, and workmanship may also suffer.

According to HomeGuide, bathroom remodeling costs start at a slightly higher per-square-foot cost of $120 and go up to $275 per square foot. Bathrooms are usually about a third of the size of the average kitchen. So, you could start a bathroom remodeling project for $5,000 and of course, spend more if you’re creating a bath oasis together with your master bedroom. An average bathroom of 40 square feet, with a cost of $200 per square foot would be an $8,000 bathroom renovation — mid-range for average project costs according to HomeAdvisor.

How can you get the look and performance you want for the right price?

First, if you’re getting a new bathroom or kitchen designed and built, consider working with a contractor who provides the design and builds services directly through their company. Don’t make the mistake of going around to get “bids” and choosing the most affordable. That will seldom produce the quality you want, and the prices won’t be much less than a full-service remodeling business that specializes in kitchens and baths. Settle on a price for the total job.

Use a cash-out refinance or a home equity line of credit (HELOC)

Once you have an idea of what you want your kitchen or bathroom remodel to be, and a general idea of the price, you can pay for it using the equity in your home. You may even be able to refinance your 30-year fixed-rate home mortgage and get extra money to pay for your remodeling project. Another alternative is the home equity line of credit (HELOC) or home equity loan (HEL). While you may find companies that offer independent financing for your kitchen or bathroom remodeling project, your interest rates on these mortgage-based products will always be superior. If you’re tired of your old kitchen or bathroom, why not investigate how you can change it today?

Sources

https://www.homeadvisor.com/cost/kitchens/remodel-a-kitchen/

Plus my work w contractors – I’m doing work for contracting software companies right now.

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