When it becomes possible, owning a home can be a very big milestone in one’s life. Your home is a huge asset to be in possession of, despite the fact that it can be a pricey one. There may, however, come a time when you use your home to fund other endeavours or projects. Should this become apparent, you’ll need to know your loan options.
There are a plethora of ways in which you can go about this as it turns out. Second mortgages are very popular, and can benefit the borrower in multiple ways. A home equity line of credit, or HELOC, is one of the most useful loans to consider. Home equity lines of credit are one of the most popular options to go with, if you are seeking this type of loan. Even though all loans have their drawbacks, you can be pleasantly surprised with what a home equity line of credit has to offer.
Here are the six best benefits of home equity lines of credit:
Benefit #1: HELOC boosts credit history.
A home equity lines of credit offers many positive benefits to your credit history. Generally speaking, if you successfully apply for a home equity line of credit, your finances were in good standing. This goes a long way, in terms of determining your future decisions involving loans. Once a lender reviews your credit history, and sees the HELOC on there, you may get an increase on your credit.
Anytime a HELOC is present on your credit portfolio, and payments have successfully been made, you set yourself apart. It shows that you know how to manage your finances, especially when it comes to larger endeavours. Credit is always subject to being impacted both positively and negatively. The former ensures that more doors remain open to you, financially speaking.
Benefit #2: HELOC has lower interest rates.
All payments involving your home will be impacted, in some fashion, by applicable interest rates. The same sentiment can be applied to the various second mortgages that you come across. However, as it relates to a home equity line of credit, you may be able to secure a lower interest rate overall.
Unlike unsecured loans such as your everyday credit card, a HELOC may offer a reduced interest rate on your payments. Plus, if you have an adjustable rate on the loan, it can provide you with lower interest rates as well. Other types of loans can fluctuate with interest, but a HELOC can be your best option to go with.
Benefit #3: HELOC has tax benefits.
In some cases, you may be able to reduce the amount of tax you pay by going ahead with a HELOC. Some borrowers who have been successfully approved for one may be eligible for a tax reduction. This is based on your paid interest rate being able to be claimed; discuss this with your lender for more information.
Benefit #4: Pay only what you require.
Using the power of a second mortgage can involve several different criterion to be fulfilled first. When it comes to utilizing your HELOC, you’ll soon realize how simple its mechanisms are. For example, since it is a revolving line of credit, you’ll be able to use only as much as you need. There is no need to worry about paying for what isn’t required!
It all comes down to the equity stored in your home. The equity, calculated beforehand, is the foundation of the loan, and it can be pulled from whenever you choose. No matter if this is in the form of an immediate lump sum, or borrowing overtime, you have options. Just like a credit card, it is there to be utilized whenever possible!
Benefit #5: HELOC gives you lots of freedom.
For the most part, once your home equity line of credit has been approved, the money is essentially yours. There are next to no restrictions on how you should use the line of credit, as it is your home’s equity. Not only can this be advantageous to use for other potential properties, but it can extend beyond that.
For instance, many borrowers commonly use their HELOC to fund other projects. These projects can come in the form of major renovations to their original home. Once this is underway, it further adds value to the home, which can come in really handy down the line. No matter how you choose to proceed, the HELOC is yours to utilize however you see fit.
Benefit #6: HELOC has friendly repayment options.
Finally, a home equity line of credit comes with great payment options for potential borrowers of all backgrounds. It is important to know that you can repay the principal amount on the loan whenever you so choose.
For example, if you are in need for a shorter term on the loan, you can pay interest for that length of time. After you draw from the HELOC, you can proceed to pay off the balance after receiving your funds. It is straightforward, and easy to utilize!