HELOC 101: Home is Where Your Equity Is
08/16/2017
A Home Equity Line of Credit — also known as a HELOC — is a convenient way to finance a wide range of needs. From home improvement projects to college tuition, a HELOC may be a great solution to meet your financial needs. It is important that you fully understand how this form of credit works.
HOW MUCH CAN I BORROW?
The lender will focus on a certain percentage of your home’s appraised value and subtract the balance owed on your existing mortgage. Then, they will examine your credit history and ability to repay the loan by looking at your income, debts, and other financial obligations. This helps the lender determine if you are eligible for credit and, if so, how much.
WHAT IS A DRAW PERIOD, AND HOW DOES IT WORK?
A draw period is simply the time you have to use – or draw from – your HELOC. During this time, you can access your line of credit with special checks, or use online banking to make an internal transfer to another Solvay Bank account, such as checking or savings. You must make a minimum monthly payment to cover the interest on the credit used.
WHAT IS THE REPAYMENT PERIOD?
The repayment period immediately follows the draw period. During this 10-year period, you must pay back the principal balance of your borrowed funds along with interest. Your minimum monthly payments will likely increase during this time as you are paying both principal and interest. The payment can also fluctuate based on your rate, which is variable and subject to change without notice.
Learn More about our Home Equity Options