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If you're like most homeowners, your home is one of your most important assets. You might have plans to pass it on to your children or sell it when you retire. But, you don't need to wait years to tap into your investment. Accessing the equity now could provide cash to eliminate lingering high-interest rate debt, help fund your child’s college education, or pay for other expenses. Either way, your home's equity might offer a great deal of financial flexibility. 

Equity = Current Market Value – (Mortgage Balances + Lien Balances)

Whether due to paying down the mortgage principle, rising home values, or both, it’s possible to access your home's equity using a home equity line of credit (HELOC) - no open houses required.

Here’s why a HELOC might make sense for your financial situation.

HELOCs Help You Save Money

Borrowing money against the equity in your home gives you access to a low-interest rate loan. When you use the funds to pay off high-interest rate credit card balances, medical debt, back taxes, and other creditors, you can save on interest charges and fees that accrue with each passing month. Consolidate those balances with HELOC funds.

HELOCs are Flexible

If you’ve ever used a credit card, you've enjoyed the flexibility of borrowing only what you need and repaying the balance over several months. Your monthly payments were only based on the amount you've charged or borrowed. HELOCs, like credit cards, allow borrowers to access a revolving line of credit. But there is a major difference: collateral.

Most credit cards do not require collateral, but a HELOC uses your home as collateral for the loan. This means if you fail to repay the loan as agreed, you risk losing your home in foreclosure proceedings.

HELOC users enjoy many of the same benefits as credit card users but without the double-digit interest rates. Some benefits include:

  • Preset credit limits that don’t require you to borrow more than you need at any one time

  • The ability to increase the available balance by repaying borrowed funds

  • A variable interest rate applied only to the borrowed amount, not the entire credit limit

  • Repeat access to the credit line without the need to re-apply

  • Access to the funds anytime you need them

  • Monthly payments that adjust based on the amount you owe

HELOCs Can Be a Financial Lifeline

According to financial experts, an emergency fund equal to six months of living expenses is the ideal savings cushion. That amount should help cover unexpected expenses without throwing your budget off track. If you have a HELOC in place before you need it, it could be the financial lifeline in the absence of a fully-funded emergency savings account.

With fast approvals and minimum credit lines of $15,000, a Vermont Federal HELOC could give you access to the funds needed to achieve your financial goals.

 

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