Home Equity Line of Credit

A HELOC (Home Equity Line of Credit) is a revolving line of credit, similar to a checking line of credit, with the difference that it uses the equity you have built in your home as collateral.

  • Some of the characteristics of a HELOC include:

    • Revolving line of credit; you can take money out, pay if off, and then take money out again

    • Variable interest rate, generally slightly higher than that of a regular mortgage (a primary mortgage used to purchase a home)—but lower than the interest rates of most credit cards or personal loans

    • Most lenders offer HELOCs for the full equity in the home, as long as the loan amount does not exceed 80% of the total home value

    • In a HELOC, interest is calculated daily, and the payment is adjustment month to month. As you pay down your HELOC, your monthly payments become lower.

    • Many lenders offer HELOCs with a 10-year maturity date; depending on the type of HELOC you get—at the end of the 10 years, the remaining balance is often converted into a 20-year loan with a fixed interest rate. If there is no balance remaining at the end of the initial 10-year loan period, then the HELOC simply terminates.

    • A HELOC can be a good solution for someone looking for a short-term loan, for example to refinance debt or to use as a downpayment on another property

“Getting this transaction completed was an important step for us. It allowed us to close one chapter of our lives and move forward with our next plans. I really appreciated Alejandro’s professionalism and the great service he provided us.”

— Mackenzie, Business Owner

Home Equity Line of Credit vs. Second Mortgage

Another option for taking cash out of your home is getting a Home Equity Line of Credit (HELOC). A HELOC is similar to a Second Mortgage in that they are both loans that use the equity in your home as collateral. Key differences include:

  • A second mortgage has a fixed interest rate, whereas a HELOC has a variable interest rate

  • A second mortgage is a one-time loan that you pay off over time, while a HELOC is a revolving credit line

  • Second mortgage usually have slightly lower interest rates than HELOCs

  • When you pay down a HELOC over time, your minimum monthly payment also decreases (similar to how monthly payments on a credit card decrease with a lower balance). On the other hand, a second mortgage has a fixed monthly payment that doesn’t change until the loan is paid off. That means that if you start paying more than the minimum monthly payment on a second mortgage, you will pay your loan off faster, but your minimum monthly payment amount will stay the same.

    If you are thinking about getting a HELOC or Second Mortgage, please contact us for a detailed loan scenario for your specific situation, as there may be additional options available to you.

Get a Free Brainstorming Consultation

We provide many different mortgage options. If you are interested in getting a loan using your home equity, give us a call to schedule a Free Brainstorming Consultation. We will answer your questions and let you know about your options.

Call us at 310-294-9417 for a free consultation or self-schedule an appointment online.