Home Equity Line of Credit

1. Home Equity Line of Credits have one of the lowest interest rates and minimum payments of any other consumer loan.
2. Application and documentation requirements are generally less than for traditional first or second mortgages, making it easier to qualify for a Home Equity Line of Credit.
3. Mortgage insurance is not required on any Home Equity Line of Credits, which reduces monthly payments.
4. Interest payments are tax deductible.
5. Home Equity Line of Credits may create significant monthly cash flow when the borrower uses them to pay off existing debts.

Who is the program right for?

A Home Equity Line of Credit is beneficial over a cash-out refinance when you are able to repay the loan off before the repayment period of the loan. Because the draw period only collects interest payments, you will not see the balance of the loan decrease. But the interest rate will be lower than the mortgage interest rate.

When you have a prepayment penalty on your first mortgage you can take out a Home Equity Line of Credit for your cash-out needs instead of doing a cash-out refinance to avoid paying the prepayment penalty.

A Home Equity Line of Credit is right for a very responsible borrower. With a line of credit you need to manage your financials yourself. You are able to tap into the line of credit throughout the draw period which is beneficial to those that need available cash, but also can be a problem for those that do not have self discipline.

Overall, a Home Equity Line of Credit is recommended when there is no benefit to refinancing.