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What is a HELOC?

You’ve spent years paying off your mortgage and building value in your home — and depending on the market you’re in and how long you’ve owned your home, the property may have gone up in value on its own as well. And now, you’d like to tap into that built-up value to pay for college, a wedding, a vacation or even home improvements to make your home more comfortable and give it more valuable. That’s when a lot of homeowners turn to home equity to help them get back some of the money they’ve paid into their home… so they can use it for other purposes. A home equity loan is just one way to tap into your home’s worth. But, there’s a second option - a home equity line of credit, or HELOC - and for many homeowners, it could be a much better choice.

What is a HELOC?

A HELOC is, essentially, a line of credit that you can draw from over time. As with a home equity loan, the amount of credit you have available is based on the equity you’ve got in your home. But there are several significant differences between a HELOC and a home equity loan, and these differences can make a HELOC a far more attractive option, depending on how you’re using the funds:

  1. While a home equity loan gives you a ”lump sum” of cash all at once, a HELOC lets you draw from your credit reserve as expenses come up, allowing for far greater flexibility compared to a traditional loan. How long can you access the equity? That’s determined by the term of the loan. At UMe, the term can be as long as 10 years, which means you can gain access to your home’s equity for any expenses that come up during that timeframe.
  2. With a HELOC, you can “refresh” your available funds as you pay down your balance. What does that mean? In this instance, a HELOC works more like a credit card than a traditional loan: As you pay your balance down, the funds you pay off become available again. For instance, suppose you have a HELOC for $100,000 and you’ve used $10,000 of your available balance. That leaves you with an available balance of $90,000. But then say you pay back $5,000 of your balance. Now you have $95,000 available to borrow against. This single feature provides you with ultimate flexibility in how - and when - you use your funds. With ongoing access to your home’s equity, there’s no need to take out loan after loan as additional expenses crop up.
  3. The funds from your line of credit can be transferred directly to your UMe checking account as you need them, so you can easily withdraw funds via ATMs for fast, easy access to your cash.
  4. In their early days, HELOCs provided access to a relatively limited amount of cash. But today, a UMe HELOC can give you access to up to $250,000 of your home’s equity.
  5. Unlike a second mortgage loan, there’s no application fee, no points to pay and no closing costs - that alone can mean savings of several thousand dollars.
  6. As with a traditional home equity loan, the interest you pay on your home equity line of credit may be tax deductible.
  7. If you want to pay off and close your line of credit before the term expires, no problem - there are no prepayment penalties to worry about.

HELOCs can be an especially good option for people who want ongoing access to their home’s equity so they can pay for upcoming, planned expenses, like college tuition or long-term remodeling plans. But they can also be a great option for anyone who likes the idea of having ongoing access to cash for unexpected expenses that can pop up during the term of the loan.

Ready to apply?

Applying for a HELOC with UMe is easy - just gives a call at (818) 238-2900 and we’ll get the application process started. For more information about UMe’s HELOCs, check out this page for rates and fees, or this page to make sure you have all the paperwork necessary to make the application process as quick and simple as possible.

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