subject: How to buy an equity line of credit (HELOC) [print this page] How to buy an equity line of credit (HELOC)
Shopping for a home equity line of credit (HELOC) is a relatively simple procedure compared with the purchase of a mortgage to a HELOC in particular the most important characteristics that should be after are the same from one institution to another. It has, however, has some features that should be familiar with the success of online shopping.
Some of the main lines of credit, mortgages, and you should understand when purchasing a> HELOC.
Exposure:
Before deciding to apply for a line of credit in the amount of equity in your home, you should be aware of the risks, particularly the increased risk of exposure to interest rates. HELOC is a line of credit with variable interest rate instead of a loan with a fixed amount and the interest rate is all time there is a change in the prime rate, the first day of the month following the change. This property makesHELOCs risky when interest rates rose standard arms are longer adjustment periods.
Interest expense and margin:
In general, all HELOCs Prime Rate, as in "The Wall Street Journal tied. This greatly simplifies the buying than the variable rate mortgages, for example, may be that associated with different rates and require further investigation.
However, HELOCs generally freeVariable as a fixed interest rate. The interest rate charged to the borrower a certain amount, known as a margin is added to the prime rate. Borrowers and buyers should always know what is the margin that varies between different banks.
Lenders of home equity lines generally offer a temporary reduction to keep interest rates low for a relatively short introduction (eg 6 months). AfterThe initial rate of prime rate plus margin.
Setting limits:
One of the things that the borrower will pay attention when you apply for a credit line for capital assets should be if there is a threshold tie, a minimum average balance of loans. Some plans have restrictions on the use of the HELOC can be set a minimum amount required each time to borrow money and to maintain a minimum pending.
Fees and charges:
Many of the initial costs and the costs of establishing a line of credit are similar to traditional mortgages. These costs include an assessment of property taxes, registration fees and points (but only rarely donors load points). In addition to these businesses, consumers pay an annual fee (often waiving the first year) and a penalty (often resign after 3 years).
If you are buying a home equity The credit line, you should review and evaluate each of the above characteristics, in order to ensure that the conditions of the plan meets your recruitment needs. Note that the default of repayment of the loan can cost the loss of their homes.
