Holidays snuck up on you this year and you’re not sure where you’re going to come up with the extra cash for all of those gifts and other holiday expenses. Have you considered tapping into the equity of your home? If you’re expecting some pretty hefty expenses this holiday season, a Home Equity Line of Credit (HELOC) may be the solution to your dilemma. 

A HELOC is a line of credit that is extended for a set term. It is similar to a credit card in that you have a pre set limit you can borrow and you just draw money, as you need it. You will have monthly payments due but only based on the amount you have borrowed. It’s basically revolving credit, so once the principal is repaid, more becomes available for use. 

A HELOC for Holiday Expenses

If you sit back and begin to ponder all of the expenses you face this holiday season you may be quite surprised. Many of us just think gift giving, but there may be so much more you just haven’t considered. Holiday travel, decorating, entertaining, extravagant meals or parties and other festivities can all put a huge dent in your savings. That is if you even have anything saved. If you don’t want to max out your high-interest credit card or deplete your emergency fund, you may want to look into the possibility of a home equity line of credit. With a HELOC, you only need to borrow what you actually need when you need it. It may be the answer to helping you cope with holiday spending.

If you have equity built in your home, a home equity line of credit may be a great alternative to a higher interest term loan. A HELOC is a secured loan using your home as collateral. The amount you can borrow is based on the value of your home minus what you owe on it. This can include the balance of your mortgage and any other loans using your home as collateral. HELOCs can be an ideal solution for completing home renovation projects or for educational costs that are spread out over time. A home equity line of credit is a good option for paying down high-interest debt or for any large or unexpected expenses. This can include the high cost of holiday shopping, entertaining and more that we mentioned above.

Benefits of a Home Equity Line of Credit 

·      HELOCs are usually available at a lower interest rate than other types of loans.

·      A HELOC may be easier to qualify for because your home is used as collateral.

·      A HELOC remains unused until a borrower needs it.

·      Flexibility to draw the money you need when you need it.

·      Only pay interest on the portion of the credit line you use.

·      A borrower may qualify for larger sums than a personal loan, based on the equity built in a home.

A HELOC is a Great Way to Have Extra Income at Your Disposal

A HELOC enables you to open a line of credit with your home as collateral. You need to consider the risks when considering borrowing. Using your home as collateral means your home is in danger of foreclosure if you don’t make your payments. Always keep that in mind when applying for a home equity loan or a home equity line of credit. Lenders will also consider other factors, such as your credit history and ability to repay when deciding if you are eligible for a HELOC. Think about this before applying.

Is a HELOC an Option?

To determine if a home equity line of credit is an option for you, you must first determine how much equity you have available in your home. Taking the value of your home and subtracting the balance of your mortgage or any other outstanding liens can calculate this. Lenders usually require a borrower have a minimum amount of equity in their home to qualify for a HELOC. This minimum amount may change based on the individual lender. If you determine a HELOC is right for you, then it’s time to look for the best deal. Be sure to compare interest rates, fees, and terms. Not all lenders are alike. Visit Spirit Financial Credit Union or your local credit union for comparison.

You can enjoy the stress-free peace of mind that comes with a line of credit at your disposal this holiday season. Click to learn more about a Spirit Financial Credit Union no annual fee Home Equity Line of Credit. For more information on HELOCs, see our blog “Home Equity Loan vs. HELOC.”