- Personal Finance
What Is A HELOC?
Use Your Home Equity For Good
If you are facing a lot of bills, or you want to use your equity to pay for an improvement to your home, you should consider getting a HELOC. What is a HELOC? This stands for Home Equity Line Of Credit.
To qualify for a HELOC, you must have a satisfactory credit score and have enough equity with which to borrow against. Be careful that you can repay it, or it can have the same consequences as not paying your mortgage.
A home equity loan is often referred to as a second mortgage because the lender will hold the second position on the loan. This means that if the home is foreclosed upon, this lender will get anything that might be left over after liquidation.
How Do You Get A Home Equity Loan
How do you get a home equity loan? You will apply for this loan just like you would apply for any other loan. Go to the bank, fill out a form and you will hear back from the bank in a couple of days. To make the process easier, you should file online and hopefully get a decision immediately.
To get approved, or make the approval process easy, you should have a credit score of 650 or higher and have sufficient equity. Your lender will be able to show you what equity requirements they will have to offer a loan.
Ways To Use A Home Equity Loan
If you do get a home equity loan, what are some things you can do with it? Some ideas include:
What you can do is get a home equity loan, and then use that money to pay off your bills. You then repay the home equity loan. This should give you a lower interest rate doing it this way.
-Cash Out Equity To Improve Your Home
If you have some improvements you want to do, or you need to repair the roof, it is a good way to get the money that you need. Equity does nothing for you if there is no way to access it.
-Pay Medical Bills Or Put A Down Payment On Another Loan
If you want to pay off some old medical bills, or you want to buy a new home, getting a home equity loan could be the first step toward making that a reality.
If You Cannot Pay Off A Home Equity Loan
If you can't make the payments to your home equity loan, you should be prepared to lose your home. It might not make sense for a second lien holder to go after your home, but there is a reason for that.
Say you don't make the payment and the lender moves to foreclose on the home. What happens is that the first mortgage holder will get their money back first. The second lender will then either get what is left, or if you are underwater, you will most likely get sued and brought to court.
So, if you cannot pay your second mortgage off, you should make arrangements to do so, or be prepared to declare bankruptcy.
Remember This Is A Loan
Your second mortgage is a loan that needs to be repaid. This means that you should treat it just like you would any other debt obligation. Yes, it is your equity, but it is not your money until the property is sold.
Home equity loans are great tools to pay off debts or make some improvements, but make sure that the money is well spent. Once you cash out the equity in your home, it is going to take some time to either repay the loan or build up more equity in your home.