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What Is Involved In Getting A HELOC?


The Spire

Want to access the equity in your home, but don’t want to sell it to access that money, consider using a HELOC. A HELOC is a Home Equity Line of Credit and allows someone to borrow money using the equity in their house as the collateral for the loan.

A HELOC is different from a usual loan. This works more like a credit card. It is set up for someone to borrow on an as-needed basis up to the limit of the loan. The terms of a HELOC vary from 5-20 years. These loans are particularly helpful for homeowners who aren’t sure exactly how much money they need for things, such as medical bills or home-improvement projects.

The total amount that is borrowable depends on how much equity there is in the home. The bank usually allows someone to borrow 75%-85% of their home’s appraised value minus what they still owe on it. 

For example, let’s say someone’s home is worth $400,000, but they only owe $200,000 on the mortgage. 75% of $400,000 = $300,000 – $200,000 leaves them with a potential HELOC of $100,000. There is a home equity loan amortization schedule which tells how much you still owe based on different variables. 

The bank will also look at credit history, income, and debt load to assess your ability to repay before approving the loan.

Repaying a HELOC can be flexible, but they have these details in common:

  • Interest is only required on the amount borrowed
  • The interest rates are variable, but they are generally lower because the bank carries less risk. Your house is the collateral.
  • It is a revolving line of credit. If the credit limit is $100,000 and you borrow $50,000 and then repay $25,000, you still have $75,000 available to borrow. 

Interested in a home-improvement project, contact your lender to see if a home equity loan is the right tool to get the job done.

A Lending Hand for Financing Home Mortgages

Spire Financial (A Division of V.I.P. Mortgage, Inc.) brings lending expertise to you. All of our loan officers offer personalized communication for every client, guiding them through the process. We can show you ways to maximize your finances and unlock future opportunities. Spire Financial keeps you in control of refinancing, debt consolidation, and home equity. Together, we can achieve your financial goals.