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Points to consider before applying for a HELOC

Mark Cappel
UpdatedSep 19, 2007

What do I need to ask when looking for a home equity line of credit?

What do I need to ask when looking for a home equity line of credit?

Home equity lines of credit (HELOCs) are credit lines given to homeowners based on the amount of equity in their home, and are a common type of loan used by borrowers to access their home equity. Unlike home equity loans, which provide a one-time lump sum loan secured against a home, HELOCs provide an open line of credit, with the credit limit determined by the amount of equity in the home, allowing homeowners to borrow what they need, when they need it. HELOCs are especially popular with homeowners planning home improvements, as they provide much more spending flexibility than traditional home equity loans.

Before taking out a home equity line of credit, you need to first ask yourself what are your goals, and how much money do you need to reach those goals. For example, if you are planning to upgrade and redecorate your kitchen, you need to carefully review your plans, try to obtain price estimates for the work, and determine the cost of the materials and appliances you want to install. Once you have a good idea of how much money you need, you should look at the amount of equity in your home to determine if you have enough equity to fund the project you are planning. You do not want to obtain a home equity line only to find out that you do not have enough credit to see your project to completion. If you do not have enough equity, you will need to reconsider your plans.

Once you have determined how much credit you need, you should contact various home equity lenders to discuss the loan terms they can offer you. It is important that you speak with at least three or four lenders so you can compare the interest rate and loan terms being offered by different lenders; this should give you a good idea of what interest rate you can expect to pay. I also encourage you to visit the Home Equity Line Resources page, where you will find a wealth of information and resources for consumers looking to obtain a home equity line. An especially helpful article, which will tell you what to look for in a new home equity line of credit loan.

Also, if you submit your contact information to the Savings Center, we can have several pre-screened home equity lenders contact you to discuss the loan options available to you.

I wish you the best of luck in obtaining a home equity line of credit that meets your needs, and hope that the information I have provided helps you Find. Learn. Save!