Home Equity Lines of Credit

According to Lending Tree, the average American has gained approx. $113,000 in equity in their home over the last 3 years! So now might be a great time to consider a home equity line of credit, or HELOC. HELOCs are a great option for home renovations, unexpected expenses, consolidating debt, paying for college and more! Here is some important info to keep in mind if you are considering a HELOC.

What is a Home Equity Line of Credit (HELOC)?

With a home equity line of credit, you can use your line of credit as needed throughout a borrowing period, typically 10 years. During this period, you must make a minimum payment each month. At the end of the period, you will work with your lender to determine whether another HELOC can be set-up – perhaps with greater availability as equity in your home will continue to increase – or whether setting up the remaining balance with set monthly payments, like any loan, is in your best interest.

Can I use a HELOC for anything I want?

One of the benefits of a HELOC is the flexibility. So yes, you can use it for anything you want, but keep in mind, HELOCs are best for longer term, ongoing expenses such as home renovations, college, etc.

You can use your HELOC for short-term purchases such as vehicles or vacations, however, keep in mind that failure to make payments on a HELOC could lead to foreclosure on your home. With any purchase, ensure that your income will support the repayment of that purchase over time or consider refinancing those items when needed and use the loan funds to pay down your HELOC balance.

Is there a difference between a HELOC and a HELOAN (Home Equity Loan)?

HELOCs are like a HELOAN in that the loan is secured by the property but there are some differences in how the two works. A HELOC is a revolving line of credit – meaning you can draw and pay down your balance with flexibility over the pre-determined period. A HELOAN is advanced in full when the loan is taken out and you begin making fixed monthly payments immediately.

Many times, either option requires a second mortgage on your home. A second mortgage is any mortgage loan which is subordinate to a first mortgage loan. Second mortgages tend to have higher interest rates and shorter terms than first mortgages.

Who should I call to get more information about a HELOC loan?

Well, Farmers & Merchants Bank of course! We’re here to help. Give us a call and we will be happy to sit down and review your goals so we can provide you with the best option for your budget and lifestyle. After all, we want to be more than your bank. We want to be your HELOC provider!

NMLS #718145

published on 06/15/2023