A great collection of our HELOC news articles that we have been publishing throughout the years. Use the links below to navigate to the article and information that you would like to read more about.
Home Improvement Time - HELOC or Home Equity Loan?
Submitted on June 14, 2006
Summer is everyone's favorite time for reading, traveling, and home improvement projects. A wise way to manage financing the latter is to tap into your accumulated home equity. But before you visit your bank, it's important to decide whether you want to use a home equity loan or a home equity line of credit.
Pay off HELOC with Cash-out Refinancing
Submitted on June 27, 2006
A few years ago, when you opened your home equity line of credit (HELOC), you thought you'd found the perfect financial tool. With a flexible line that you could tap when you needed, it seemed like the ideal way to take care of short-term debts. But every financial tool has its shortcomings, and the HELOC is no different. With the recent climb in the prime rate, you've probably noticed that less and less of your monthly payment is going toward principal. Fear not-a cash-out refinance of your first mortgage could be the answer to your short-term woes.
Did a cold chill run down your spine the last time you checked the interest rate on your home equity line of credit? Borrowers with HELOCs are feeling a little jittery these days because rates are heading in the wrong direction-up. HELOCs are tied to the prime interest rate, which has been traditionally stable until this most recent upturn.
To make matters worse, many HELOCs don't have the caps that you find with the standard Adjustable Rate Mortgage (ARM). ARMs generally have an upper tier to their rates, preventing the borrower from being locked into an absurdly high interest rate. HELOCs don't have that guarantee.
Solutions to rising HELOC rates
All this news may seem unsettling; but there are solutions if you're finding that the payments on your HELOC have become a financial strain. One solution is to transfer your short-term debt onto a long-term, fixed-rate mortgage. Here are a few reasons why a cash-out refinance of your first mortgage could provide you with the relief you need:
- Lower payment: Since first mortgages tend to have lower interest rates than HELOCs, and because you're refinancing to a longer term, your monthly payment may decrease. This may be advantageous if you're going through some short-term financial troubles.
- Less volatility: The best part about a cash-out refinancing is that you can lock in your rate and get a good night's sleep. No need to wonder what the Fed is going to do to the prime rate tomorrow- you're locked in.
- Ability to prepay: Just because you've refinanced, you can still prepay your loan. Simply by increasing your monthly mortgage payment and stipulating that the money goes toward principal, you can whittle away at your mortgage debt.
Most financial experts will tell you that transferring short-term debt into long-term debt isn't a prudent move. However, if you're feeling handcuffed by the rise in the prime rate, paying off your HELOC with a cash- out
Shopping for a HELOC
Submitted on July 28, 2006
Although you may have knowledge and experience regarding how to shop for a traditional first or second mortgage, browsing around for a home equity line of credit (or HELOC) is a loan of a different color. The good news is that it's normally a much easier and less costly procedure, with some rather attractive perks.
It's widely believed that good things in life come to those who ask. This especially applies to those who ask for concessions and perks when shopping around for a
Rising Interest Rates? Time to refinance your HELOC
Submitted on September 25, 2006
With interest rates rising, there's no time like the present to get your financial ducks in a row in order to save money. Back when rates were still cheap, home equity lines of credit (HELOCs), with their low introductory adjustable rates, were the preferred way to go. But now that they're becoming pricey compared to other loans, consumers are seeking prudent alternatives.
Just last week, one major news outlet reported that consumers who enjoyed rock bottom introductory rates on HELOCs just a few months ago are now paying double-digit rates. That's because interest rates, in general, have gone up considerably. As introductory adjustable rates on
Converting a HELOC to a fixed rate Home Equity Loan
Submitted on October 04, 2006
Many homeowners who have enjoyed the convenience and savings of a home equity line of credit (HELOC) aren't enjoying the consequences of rising interest rates. As a result, many are now turning to fixed rate equity loans instead. Converting from one to the other is neither a difficult nor expensive process.
During times of low interest, home equity lines of credit offer attractive and competitive adjustable rates. These
Cash out and cash in with a HELOC
Submitted on November 07, 2006
A home equity line of credit can give you the flexibility and the cash you need to make improvements to your home. If you make the right improvements, the value of your house will climb. Wouldn't it be satisfying to use equity to create equity?
Prepare for Unforeseen Disasters with a HELOC
Submitted on November 23, 2006
Life is unpredictable. Disasters strike, often when we least expect it. But while we can't predict when or where misfortune will occur, we can take steps to prepare ourselves for when those moments arrive. A home equity line of credit (HELOC) is a great tool to ensure that you've got the back-up cash when hard rains fall.
The last few years have yielded many heart-wrenching scenes from areas ravaged by hurricanes. For those fortunate enough to have been spared nature's wrath, pictures of people displaced by these storms have reminded us that there are times when you may need access to cash in a hurry.
Goodbye HELOC, Hello Mortgage Refinance
Submitted on December 04, 2006
If you need money for home improvement projects, a mortgage refinance may offer a better deal now than a home equity line of credit (HELOC). HELOC rates have risen significantly, so this may be the perfect time to refinance into a new loan, even if it means accepting a slightly higher mortgage rate.
The Annual Mortgage Check-up
Submitted on January 19, 2007
As the year comes to a close, it makes sense to re-assess your finances and make sure that you're on track for the future. An important step in this process is examining your mortgage to ensure that you're still getting the best deal possible.
Stick out your financial paperwork and say, "Ahhhh!" It's time for that annual check-up. Thankfully, this check-up doesn't require you to face your weight on that maddeningly accurate doctor's scale, or sit in a cold and drafty little room with an open hospital gown. Actually, it's a mortgage check-up that's in order, and making time for a quick review at year-end may yield some fruitful results.
Your year-end home loan review should examine the most common sources of potential savings: home equity lines of credit (HELOCs) and private mortgage insurance (PMI).
If you have a HELOC, you might be feeling the pressure of rising interest rates. Take a few minutes to research the current rates for fixed first and second mortgages. These rates are still near historic lows, and may be significantly lower than what you're paying on your HELOC. Locking in a low fixed rate now could create significant savings over time.
You have two options for refinancing your HELOC:
- Combine the HELOC with your first mortgage through a refinance home loan.
- Convert the HELOC by itself into a fixed-rate home equity loan.
The best choice for you will probably depend on how your first mortgage interest rate compares to current rates available.
Private Mortgage Insurance
Are you paying PMI every month? Did you know that you could cancel it once your loan balance drops below 80 percent of your home's value? Even if you haven't paid down much of your home loan, a large increase in the property's value could eliminate the need to pay PMI. Find out what your home is worth, and compare this to your loan balance. If the loan balance is less than 80 percent of the home's value, give your bank a call. The lender may need a written appraisal, but your monthly savings from cancelling the PMI will offset this cost down the road.
A straightforward review at year-end keeps your home financing as lean and trim as possible. In other words, you'll have a clean bill of mortgage health, which is just what the doctor ordered.
One Closing, Two Home Mortgage Loans
Submitted on March 26, 2007
Loan closings aren't fun-so why suffer through them more often than necessary? If you're in the process of closing a home mortgage loan, consider simultaneously obtaining a home equity line of credit (HELOC) from the same lender.
A little efficiency in life can go a long way. Since free time seems to come at a premium these days, why not consider killing two birds with one stone using one loan closing to obtain two home financing instruments? Not only will you save time down the road, you'll also realize some compelling benefits.
HELOCs are powerful, versatile, and very popular financial instruments. They function like any other revolving credit account, in that you can take cash withdrawals and make payments as needed. Even better, you can choose not to draw on the account and it won't accrue any interest. Having access to a large sum of cash can be a comforting precautionary measure, particularly if you don't have a liquid fund set aside for emergencies. Other common uses for HELOCs include debt consolidation, big-ticket purchases, college tuition, and home improvement projects, among others.
HELOCs and interest rates
Unlike a conventional mortgage, the HELOC carries a variable rate of interest. While variable rate debt can be riskier, it's a good long-term companion to the fixed-rate debt of your conventional mortgage loan. A fixed rate mortgage insulates you from rate increases, but doesn't give you access to rate decreases. Over a complete cycle of rising and falling rates, the characteristics of the two instruments are complementary. Incidentally, your credit cards also have variable interest, but at rates much higher than a HELOC. This is why HELOCs are often used for debt consolidation purposes.
On a conventional HELOC, the interest rate will be quoted as a margin plus or minus the prime rate. As is true with all mortgages, the best rates are reserved for borrowers with excellent credit. Borrowers with bad credit will be offered somewhat higher rates.
Leveraging the time and energy you put into your first home mortgage loan to close a HELOC at the same time will increase your purchasing power and provide you with access to emergency cash. The other upside is the time you'll save, which is absolutely priceless. And since time is money, saving time also means saving money.
Home Equity Loans: Just the Facts
Submitted on January 14, 2007
If you're planning to fund an upcoming project with your home's equity, don't jump in without knowing the facts. Understanding the key differences between HELOC's and home equity loans makes for more effective decisions.
If Dragnet's Sergeant Joe Friday were to shop for a home equity loan, you could bet that he'd look past the fluff and go straight for the facts. Incorporating the legendary police officer's "just the facts" mentality is your best approach to solving the mystery of home equity borrowing. So put on your detective hat, and flip open that notepad.
HELOC vs. home equity loan
Home equity loans falls into two categories: home equity lines of credit (HELOCs) and home equity loans. Both are secured by a second lien on your property. A HELOC is a revolving credit line, while a home equity loan is a form of closed-end borrowing.
A HELOC allows you to advance cash or make principal payments at your discretion. The interest rate is variable, and minimum payments generally won't reduce the principal balance significantly.
A home equity loan provides a one-time sum of cash. It carries a fixed interest rate and monthly payment. Home equity loans are sometimes called home improvement loans, because they're well suited for fixed budget projects, like remodeling your living space.
Ups and downs of home equity borrowing
The number one advantage of a HELOC is its flexibility. You can access more cash or make principal payments without penalty. The low minimum payments are budget-friendly, as well.
A HELOC's variable interest rate structure exposes you to the risk of rising rates and increasing minimum payments. Also, since the HELOC offers you the option to pay only interest, you could be left with a lump sum due at maturity.
Alternatively, home equity loans amortize with a fixed rate of interest. As a result, you know exactly how much you need to pay monthly until the loan is paid off.
Evaluating the Trade-Off
If you want to tap into your home's equity, research prevailing HELOC rates and compare them to home equity loan rates. Consider how your situation may be affected if rates rise. Then, decide how important the flexibility is to you, and whether the trade-off makes dollars and sense.
The equity borrowing mystery is a tough case to crack, but the investigative style of Sergeant Friday should enable you to find the killer loan.