Credits and Loans
Get the Facts About HELOCS
A Home Equity Line of Credit, or HELOC, is a specific type of loan that is available to most homeowners with equity. While many homeowners have likely heard about this type of loan, some may not be completely familiar with how it works.
Your Home is Your Collateral. The most important thing to understand about a HELOC is that it uses your home as collateral. Therefore if you default on this line of credit, your home may be at risk. At the same time, because your home is used as collateral, you’ll have the option to borrow more for larger items, such as home improvements and college costs among other things.
Flexible Spending with a Line of Credit. A HELOC is a line of credit, meaning that you will have a credit limit given to you based on the equity available in your home along with other underwriting criteria. The difference between a HELOC and a credit card or other personal line of credit is that you are given a “draw period” (typically 10 years) during which you can borrow or repay on that line whenever you want. Once the draw period ends, you must then repay the balance during a specified term, which is usually 10–15 years.
Possible Tax Deduction. A HELOC is one of the few credit options available where you may be able to deduct the interest you pay on your taxes. It is important that you check with your tax advisor as to whether or not you qualify for this benefit.
To learn more about how you can benefit from a HELOC through CharterBank, Click Here or call us at 800.763.4444.
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