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. 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 get credit available for your use as-needed. Once you use the credit you pay back the funds you use over time.
The minimum payments required are usually interest only. So you can pay for home improvements, college tuition, or even a down payment on a vacation home. Then you have the flexibility and financial breathing room to pay the HELOC money back over time 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 may be the answer. HELOCs offer 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 monthly payments, and lower 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. However, you need to check with a licensed CPA or tax attorney regarding your specific tax situation. If you use the HELOC for other purposes, it probably won’t be tax deductible. You should consult a tax advisor before using a HELOC to determine what you can and cannot legally deduct on 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 flexibility with access to credit at lower-interest rates, a HELOC can be a wise financial choice. One of the best reasons to work with an independent mortgage broker is their ability to compare different HELOC lenders and their terms and conditions for you. An Independent Mortgage Brokers can then advise you on your options. Typically your monthly payments will be a lot lower on HELOC drawn funds. This is due to the required minimum monthly payments typically being interest only. You can use a HELOC to remodel your home, make improvements, or use the money flexibly to meet your other financial personal or business, and family goals.