HELOC Question

Can anyone tell me how a Home Equity Line of Credit works? A friend of mine was saying she has a line of credit that she basically writes checks through, whenever an expense pops up, that the interest rate is lower than that of a credit card. I was thinking about this since I will be spending a good amount of money on dental work in the coming months so I figured vs. putting it on my credit card with a high interest rate, or pulling $ from savings, this sounded appealing.

Re: HELOC Question

I've never written checks to a third party directly from it but I have withdrawn a large sum of money and repaid it. The interest rate is much lower and its tax deductible but you will have to pay closing costs to get one. Not sure how much the dental expenses are but I'd just weigh that amount vs closing costs and whether you think you would utilize it for other things over the next 10yrs, maybe for home renovations or stuff like that. I don't carry a balance on mine but I like knowing that its available if I need it.

Re: HELOC Question

Re: HELOC Question

Mine is $75 but they automatically waive it. Not sure if that is because my first mortgage is with them too?

HELOC Question

HELOC are basically a revolving line of credit with a variable interest rate that you can draw on for 10years and then goes into a 20 year repayment period. Sometimes they have an annual fee sometimes it waived. You can access the fund via check or you can transfer the funds into your bank account if the HELOC is in the same bank as your chk/svgs acct. Most places also have lock options that you can lock a select amount of money up at a certain rate instead of worrying about variable rates. Most of the time the first 10years are interest only payments and then the remaining payments are interest and principal. So if you only make the min payment during the 10 year draw you will still be left with your entire balance at the end of the draw period.