NKS Monthly

Tips for Smart Borrowing on a Home Equity Line of Credit

A Home Equity Line of Credit is a credit line secured by the equity in your home. You can use a HELOC to provide cash as needed for a purchasing a rental property, home improvement, bill consolidation, vacation, school tuition or whatever else you like. There is a pre-set limit and you can write yourself a check whenever you need it. Payments are determined only on the amount of funds that are owed.

A home can be a good way to build long-term wealth but be aware of what the risks are when borrowing against your equity. Be particularly wary of using home equity to pay off consumer debt. You may end up deeper in debt in the long run. In general, you don’t want the term of your loan to last longer than what you’ve purchased. For example, if you use a HELOC to buy a car, try to pay off the balance in a few years and definitely before you trade in for a new vehicle.

It is important to know what the tax rules are when it comes to HELOCs. The tax deductibility really depends on what you used the HELOC monies for. The tax break is limited to interest on loan amounts of $100,000 or less. You need to consult your accountant about the tax rules regarding your specific situation.

We have HELOCs available up to 90% of the value of your home. There is no cost to the borrower to do them. You may have a minimal recording fee and an annual fee on your credit line.

For more information on Home Equity Lines of Credit and how it may be beneficial to you contact my office. There are a lot of banks that are limiting availability of HELOCs, so this might be a good option for having available money now. Remember, there is NO FEES to do a HELOC!