Homeowners access equity for a variety of purposes. They can use equity to reduce their debt volume and improve their credit scores. A home equity line of credit makes it possible to pay off debts or finance home improvement projects. Reviewing fine details about home equity lines of credit explains how the option works and what homeowners need to know.
What are the Credit Score Requirements?
A home equity line of credit requires the borrower to have a credit score of at least 680. Borrowers that cannot meet the minimum requirement won’t get a home equity line of credit. The lender reviews the borrower’s mortgage listing on their credit report. They cannot have any late payments or late charges on their mortgage. A steady history of on-time payments could help a borrower with a lower credit score get a HELOC.
How Much Debt Can the Borrower Have?
The borrower cannot have a higher than average income to debt ratio, and the lender reviews their debts to ensure that the borrower isn’t too far in debt. The basic requirement is 43%. However, if the borrower has a high volume of debt, the lender may not provide a home equity line of credit.
Starting the Line of Credit
Starting the line of credit gives the borrower immediate access to their equity up to 80%. The borrower has access to the full line of credit for up to ten years. They can get more money up to the full amount whenever they want. Unlike a home equity loan, the borrower doesn’t get a lump sum payment, and access is cut off. Borrowers can use the money however they want, and they don’t have to give their lender a reason for borrowing their equity. Homeowners can review more options from Dustin Dimisa to find the right choices for them.
How Does the Line of Credit Work?
The line of credit is available for ten years. Once the ten years pass, the borrower must start repaying the equity back. The line of credit works like a credit card account. The lender applies interest according to how much the homeowner borrows.
What Can the Borrower Expect After the Payout Period Ends?
The home equity line of credit gives the borrower an adjustable-rate repayment plan. They repay the line of credit over a period of 30 years. Since it has an adjustable rate, the interest rate changes each quarter, and the payment increases or decreases according to the interest applied.
Can the Borrower Refinance Their Line of Credit?
Yes, the borrower can transfer the line of credit to a fixed-rate loan after a predetermined amount of time. This gives them a rate that won’t change and reduces the amount of time it is paid off.
Homeowners use their equity to pay debts and reduce their income to debt ratio and qualify for better mortgages. They can also use the money to upgrade or renovate their home. Adding more features increases the value of the property. Homeowners can get further information about a home equity line of credit by contacting a lender today.