HELOCs: Accentuate the Positive

A home equity line of credit (HELOC) can give you the financial flexibility you need-and you might even feel like singing about it.

"You've got to accentuate the positive, eliminate the negative, latch on to the affirmative." The lyrical genius of Johnny Mercer advises you to focus on the good things in life. In that upbeat spirit, here's a look at the best aspects of the home equity line of credit (HELOC).

Easy money

Sometimes, it can be relatively easy to obtain a high-limit HELOC. Lenders will do business with homeowners who have good credit histories and strong home equity values. If you meet both requirements, you shouldn't have trouble getting approved. You should still shop around, however, to ensure that you're getting the lowest rate and best terms available.

HELOC access is everything

The beauty of the home equity line of credit is its flexibility. As long as you have available credit and your account is in good standing, you can access the funds. Draw-down options vary by lender, but many HELOCs allow you to tap your borrowing power with a checkbook and special credit card. You can generally request electronic fund transfers and checks payable to you.

Luxury of timing

Many HELOCs have low minimum payments that only cover the interest accrued on the balance. This is a powerful tool for households that have seasonal cash flow needs. Say, for example, that you have a big property tax bill due in November every year. But in January, you typically receive a healthy bonus from work. If you don't want to use up your cash in November, you can put the bill on your HELOC, and then pay it off when you receive your bonus. Between November and January, you need only pay the interest on the balance.

In other cases, you might choose to use the home equity line of credit for a purchase that you intend to refinance. If you decide to buy a timeshare, for example, you could write a HELOC check on the spot, and then shop for permanent financing later.

A deal to negotiate

HELOCs are not one-size-fits-all products. You can obtain them with fixed- or adjustable-rate ones, as well as adjustable-rate HELOCs that allow you to fix the rate on part of the balance. As if that isn't confusing enough, they also vary in maturity length, minimum payment, interest rate, and annual fees. With all these options, you have the power to select one that suits your preferences. You might accept a small annual fee, for example, in return for interest-only payments and a rock-bottom interest rate. Or, if you don't plan to use the line much, you may prefer no annual fees and a slightly higher interest rate.

If the process of obtaining the right HELOC starts to get tedious, just hum a few bars of that catchy tune that Mercer and Harold Arlen wrote for Bing Crosby. That'll pick your spirits up in no time.