Home equity line of credit, also known as HELOC is a secured revolving credit line against your home’s equity. It can be a good option for home renovation projects and likely to increase the monetary value of your home. It comes with a flexible structure that allows you to borrow, spend and repay the outstanding balance in a convenient way.
In this article, we’ll look down on reasons that make HELOC a convenient option to go with for a home renovation project than traditional loans.
1. Offer Lower Interest Rate
Unlike traditional loans, home equity line of credit offers lower interest rates which makes it a convenient option to go with in the long run. On the other hand, interest rates are comparatively higher on personal loans or credit cards, making HELOC a better option to go when it comes to home renovations.
2. Offer Flexible Structure
Home equity line of credit, HELOC offers a flexible structure that makes it easy to repay. You can borrow as little or as much money upto your approved credit line limit and continue using the funds as you repay them. This works similar in fashion to a credit card and makes funds available to access anytime anywhere.
3. Accommodating Repayment Option
In your withdrawal duration, you need to pay at least monthly payments on the amount you’ve taken. Once the borrowing period ends, you’ll repay the outstanding balance on your Amerisave HELOC with interest rate according to the market trend. The repayment period typically lasts 10 to 20 years.
4. Can be Opened Ahead of Time
Unlike Home equity loans, home equity lines of credit can be opened to fund a specific need. Also, a HELOC can be opened ahead of time to make the funds available at the time of need. This is unique than traditional loans in this regard and offers more flexibility and convenience.
5. Borrow Continuous Cash from Home’s Equity
Home equity line of credit offers a continuous cash flow when it comes to projects like home renovations, making it easier to complete the work in time and add value to your home. In addition, you pay interest on only the amount you’ve used during the ‘draw period’ your lender has set.
Should You Get HELOC for Home Improvement?
HELOC can serve as a good option as it’s a secured revolving credit line against your home’s equity. It can offer continuous cash flow making it easier to complete the project in time and increase return on investment. Also, it has lower interest rates and flexible repayment terms than traditional loans. Another benefit of HELOC is that it can be opened ahead of time to make the funds available at the time of need.
However, remember it’s the loan you get against your home‘s equity. Any reluctance in repayment period can put your home possession at risk. Before starting the home renovation, do your market research and use the funds wisely to increase the possible return on investment on your property.
