Choosing Home Equity Line of Credit


When you need money to pay for emergency bills, finance college education, consolidate debts, or for daily expenses, applying for a home equity line of credit is probably the easiest and the most popular method to do it. This way, you will receive a loan equivalent to the amount of equity you have in your home. (Equity is computed by the by getting the difference between present market value of your home and the payable amount of your home or mortgage.)This is the type of loan that works like a credit card. You will receive a credit limit equivalent to the amount of your loan and will serve as your revolving fund. Some lenders would even give you a card as a means of purchase. (This is different from fixed-rate loan where you will receive a lump sum amount equivalent to your loan.)Yes, HELOC is inviting but a simple misjudgment could mean losing your home. So, to avoid it from happening, make sure that you do the following:The best way to find the best deal is to shop around. Since different lenders have different sets of policies, not all can fit in to your particular need. Do research on the different sites that offer HELOC. Read carefully the terms and conditions of the different plans they offer.What you should look for:• annual percentage rate (APR)• closing costsTake note of the annual percentage rate of each lender. This will enable you to know, compare, and single out the best policy with the best value. The APR includes points, interest rate, costs of credit, and other general changes.The closing cost on the other hand is the amount you pay at closing. This includes taxes, attorney’s fees, insurance, title search fees, and processing fees. Take a closing cost you think you can afford. Inability to pay for it may result to higher fees or worst, foreclosure.Take note of the interest rate. This will determine how much you have to pay above the principal. Since variable rate is usually applied to HELOC, make sure you know the increments your lender places in your policy.Another thing you should pay close attention to is the foreclosure policy. This is important since failure to pay the monthly principal would mean losing your home. Most creditors issue a foreclosure notice 2 to 18 months after you have failed to pay the monthly fee.