Home Equity Line of Credit...should I get one?

Dated: May 13 2022

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What's a Heloc?

And should you get one

Have you heard the term HELOC?  It stands for Home Equity Line of Credit.  As the name implies, it allows you to borrow against the equity you have in your home.  You have equity when you pay your loan down and/or the value of your home goes up.

How does it work? The lender will give you a loan up to 80% or 90% of the home's value minus what you owe on it.  For example, if your home is worth $500,000 today, a lender will give you a line of credit of between $400,000 and $450,000.  If you owe $300,000 on your home, the amount you can get will be between $100,000 and $150,000.  You do not begin to pay off this "loan" until you use it.  

Why get one?  A line of credit can be used for just about anything but I think the two best uses are to make improvements to your home or as a down payment for your next home.  Updating your kitchen, primary bath or finishing the basement will add value to your home so using the equity to create more equity is a home run in my mind.  I've also had clients use the equity in their home as a down payment or to allow them to be cash buyers for their new home.  IMPORTANT....talk to the lender of your new home before using this strategy.  It's not the best option for everyone.

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Nancy Pav

Nancy has been a licensed real estate agent for 25 years helping clients all over the Northern Virginia region with both resale homes and new construction. She is a consistent top producer, having att....

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