What Is a Home Equity Line of Credit? | Ion Bank
Heloc large photo

A house is one of the largest purchases you will make in your lifetime. After years of saving, it’s so rewarding to become a homeowner! While you initially love the design, layout and amenities, needs and wants change over the years.

A home equity line of credit (HELOC) is a loan secured by the value of your house that you can use to make home improvements. HELOC can also be used for other significant purchases or to consolidate debt. Learn more about applying for this line of credit.

What Is Equity?

Equity is the difference between your home’s current value and mortgage loan balance. For example, if you owe a lender $175,000 and your home is worth $225,000, you have $50,000 of equity in your home.

Home equity can increase when your property value rises or simply as you pay back your mortgage. It can also decrease if your home value declines at a faster rate than you can pay back the mortgage.

How a HELOC Works

To qualify for a HELOC, you need available equity to borrow against. If the home’s value is less than what you owe, you will not be approved. A lender may also consider your credit score, employment history, income and existing debts.

Upon approval, a lender will place a second lien on your home, along with the first mortgage lien, that gives them rights to it. If you default on payments, the lender can take your home.

Homeowners can typically borrow up to 85 percent of their home’s value, minus the amount you owe on the mortgage. During your draw period, you can borrow as little or as much money as you need – up to your credit limit. Available credit is replenished as you repay the balance, much like a credit card.

Should You Apply for a HELOC?

A home equity line of credit often has a lower interest rate than other loans and interest may be tax deductible. The Internal Revenue Service lets you write off some of the interest on home equity credit used for home renovation projects, as long as you itemize deductions.

Take advantage of the equity in your home with a low-rate loan for anything you need! To learn more about applying for a home equity line of credit from Ion Bank, contact us today.

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