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34 Questions About Home Equity Lines Of Credit (HELOCs)

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Introduction

By Robert Duplicki      Updated February 19, 2024

I don't want to take credit for all these questions. Only the best ones! Of course the original questions come from sources with a variety of backgrounds. So be kind to them.

Table Of Contents

  1. What Is A Home Equity Line Of Credit?

    "A home equity line of credit, also known as a HELOC, is a line of credit secured by your home that gives you a revolving credit line to use for large expenses or to consolidate higher-interest rate debt on other loans such as credit cards. A HELOC often has a lower interest rate than some other common types of loans, and the interest may be tax deductible. Please consult your tax advisor regarding interest deductibility as tax rules may have changed."

    Source: Bank Of America

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  2. What Is A Heloc In Simple Terms?

    A HELOC is a form of credit similar to a credit card, but the interest rate is usually lower and the amount of credit is often higher. Most credit cards are unsecured. HELOC's are secured by property, so they are a type of mortgage.

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  3. Is Home Equity And A Line Of Credit The Same Thing?

    No. Equity is the value of an asset that you own, equal to the result of subtracting any loans against the asset, from the market value of the asset. A line of credit is a method of borrowing money. A HELOC is one of the tools that allows you to do so, but only if you have enough equity in a property to borrow against it.

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  4. How Does A HELOC Loan Work ?

    If a bank approves you for a HELOC, they will decide what amount they can loan you based on factors including the amount of your equity, your income and other expenses. So you are given a credit line at a certain amount, but only borrow against the line when you need it.

    HELOCs have a draw period (usually 10 years) which is the time when you can borrow funds. During the draw periond you are only required to make interest payments, and only based on the funds you borrow (principal). If you want to, you can pay principal payments during the draw period as well.

    The remainder of the loan term is called the repayment period. This lasts between ten and twenty years. During the repayment period you can no longer borrow funds and must pay back principal plus interest.

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  5. Are HELOC Rates Fixed?

    They can be fixed, but most HELOCs have a variable rate. The variable rate must be based on a publicly available index. For example, as the Federal Reserve raises the prime rate, banks also raise interest rates on both existing and new HELOC'S. But variable rates can go down as well using the same formula. Keep in mind that rates and terms at various lenders are constantly changing based on a variety of criteria.

    According to the Federal Reserve Board, "Variable-rate plans secured by a dwelling must, by law, have a ceiling (or cap) on how much your interest rate may increase over the life of the plan. Some variable-rate plans limit how much your payment may increase and how low your interest rate may fall if the index drops."

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  6. What Is The Current HELOC Rate?

    The link below will take you to bankrate.com which compiles rates and addtional information from many lenders. If you look at the section of their page about the best rates, you will find useful information as well as missing information based on different variables. This may not sound like a clear answer, but the reality is that your own situation will provide answers to these variables. Only with those answers, can you determine your rate at each lender. You may find another article that gives you an average rate, but that rate may not be close to what you will qualify for.

    Source: Bankrate.com

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  7. How Do I Qualify For A HELOC?

    It depends who you ask. A related article on lendingtree.com states "Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been reviewed, commissioned or otherwise endorsed by any of our network partners." Of course Lendingtree is an authoritative resource for this topic. Yet they provide this qualifier. It's a good idea to keep in mind no matter what source of information you refer to.

    As we get into specifics below, the actual criteria for a HELOC will vary by lender and by the program they are offering. But even if you receive a preapproved solicitation from a bank, and take a fair amount of time to provide the information they request, you may not get approved for the HELOC.

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  8. How Do I Compare Lenders?

    Here is a Home Equity Plan Checklist from The Federal Reserve Board. Click or tap on the image for a PDF from the Consumer Financial Protection Bureau. You will receive a ten page brochure titled What You Should Know About Home Equity Lines Of Credit. Inside on pages 6 and 7 you will find an interactive worksheet to compare three HELOC estimates.

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  9. Why Are Banks Not Doing HELOC's?

    Some of the larger banks such as Wells Fargo, JP Morgan Chase and Citibank stopped offering HELOCs in recent years because of the pandemic and uncertain market conditions. Past and present financial concerns have left some banks more cautious. Some other lenders have been more agressive in offering such equity based products.

    Lower interest rates lead to reduced demand for HELOCs as the cash-out refinance tool became a more attractive option. Banks often offer products such as HELOCs but go back and forth between restrictive criteria and more agressive approaches. By the time you read this, the status of individual banks may change again.

    Source: Investopedia

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  10. What Are The Requirements For A HELOC ?

    These requirements may adjust depending on your lender, but you typically need:

       
    • Reliable income: Many lenders will need proof of income to confirm you’ll be able to pay off your loan payments.
    • Good credit: A credit score above the mid-600s will likely approve you for a loan. A credit score above 700 is considered ideal.
    • Qualifying amount of equity in your home: You should have at least 15 – 20% home equity.
    • Responsible payment history: Lenders may evaluate your previous payment history to make sure you haven’t made any late payments in the past.
    • A low debt-to-income ratio (DTI): The lower your DTI, the better. Discuss with your lender what their qualifying DTI ratios are to potentially receive a loan.

    Source: Rocket Mortgage

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  11. Why Is It So Hard To Get A HELOC?

    Meeting the requirements above can be challenging. As indicated, not all lenders offer HELOCs. So less competition makes it easier for providers to set more difficult criteria. Marketing can be misleading so people get disappointed and give up. And the required information may be more than people are willing to share. But you don't have to be perfect. More equity may compensate for a lower credit score.

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  12. How Long Does It Take To Get A HELOC?

    According to the Credit Union of Southern California, applying for and obtaining a HELOC usually takes about two to six weeks. How long it takes to get a HELOC will depend on how quickly you, as the borrower, can supply the lender with the required information and documentation. In addition the lenders need underwriting and processing time. Miscommunication by both sides, software issues and delays waiting for IRS documentation can all lead to delays.

    Source: Credit Union of Southern California

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  13. Can I Open A HELOC And Not Use It?

    Yes, you can open a HELOC and not use it. But you have flexibility. Let's say that your draw period is ten years. You may choose to borrow some funds right away and more later. Or not borrow at first, but some time in the future. You are only restricted by the total amount of the credit line awarded, and the length of your draw period.

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  14. Does A HELOC Have Any Fees?

    A HELOC may have some associated fees and closing costs. Some lenders may offer no closing costs. There might be a small annual maintenance fee. Or there could be a bunch of closing costs but a loan with a lower interest rate than the competition. This link to Bankrate takes you to an article showing a list of possibilities. But don't get scared, shop around.

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  15. Can I Sell My Home If I Have A HELOC?

    Yes you can. The Home Equity Line of Credit doesn't restrict your right to sell your home. But it is a lien against the property and if not paid off sooner, must be paid off at closing when you sell your home. You need to determine if you wll have enough money at closing to pay all liens against the property, along with all the closing costs.

    If the sales price of your home isn't sufficient to pay all these costs, you will need other funds to pay them. In that case while you could sell your home if you have a HELOC, you may not want to.

    These factors should be part of your overall financial plan when you consider applying for a HELOC, as well as the timing of when to sell your home. For more information take a look at this article from the balance.

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  16. Is A HELOC Tax Deductible?

    Yes it is with certain restrictions. "The Tax Cuts and Jobs Act of 2017, enacted Dec. 22, suspends from 2018 until 2026 the deduction for interest paid on home equity loans and lines of credit, unless they are used to buy, build or substantially improve the taxpayer’s home that secures the loan. "

    "Under the new law, for example, interest on a home equity loan used to build an addition to an existing home is typically deductible, while interest on the same loan used to pay personal living expenses, such as credit card debts, is not. As under prior law, the loan must be secured by the taxpayer’s main home or second home (known as a qualified residence), not exceed the cost of the home and meet other requirements."

    Source: IRS.gov

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  17. Can You Pay Off A HELOC Early?

    Yes you can. If you do so during the first three to five years of the loan, some lenders wil charge a prepayment penalty. So be sure to check your loan documentation. For additional guidance in paying back your HELOC, here is an article from Citizens Bank.

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  18. Does A HELOC Require An Appraisal?

    Your lender will need to determine the value of your property. Some type of appraisal will be used but probably not one that includes a full interior appraisal. It could be a drive-by appraisal, a broker price opinion, or a computerized equivalent. The exact method will vary among lenders.

    If the appraised value comes in lower than you expect, this will reduce the maximum line of credit that you will be offered. Perhaps you are confident that the interior of your home has greater than average value, and only an exterior appraisal was completed. In that case you may be able to convince the lender by providing information that supports a higher value.

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  19. How Much Will A HELOC Let Me Borrow ?

    "The cash you can get out of your home depends on the amount of equity you have in your home, as well as your lender’s guidelines. A typical HELOC lender will allow you to access 80% of the amount of equity you have in your home but some lenders might go up to 90%, though usually at a higher interest rate."

    Source: Forbes Advisor

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  20. DoYou Have To Make Monthly Payments On A HELOC ?

    An interest only HELOC requires monthly payments of interest, but only on the amount that you have borrowed. This applies during the draw period. So you are only paying interest on the money that you are using. During the repayment period, assuming that you owe a principal balance, monthly payments of principal and interest are required.

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  21. How Do You Calculate A HELOC Payment ?

    If you click on the image below you will be taken to a link at a bank website that provides a HELOC Payment Calculator. You can find the same calculator at various bank websites, and I have found the same example used. The calculations are based on a loan amount of $50,000, an interest rate of 4.9%, an interest-only period of 10 years (this is the draw period), and a repayment period of 10 years. The results are a monthly payment of $204.17 during the draw period and a monthly payment of $527.89 during the repayment period. Here are some points to keep in mind if you choose to use this calculator, and some points about the example given:

    Calculator Image That Links To HELOC Calculator

    Image by Open Clipart-Vectors on Pixabay

    • Starting with the loan amount shown above, you see four variables that you get choose to calculate the two types of monthly payments. This calculator offers three sets of results. First wth a graph displaying the payoff schedule, second a table showing the annual payments and balance for twenty years, and third an amortization schedule for 240 monthly payments.
    • The example given is helpful yet can be misleading unless you are properrly prepared. Notice that the calculator uses the term "loan amount," but the actual payments for a HELOC are based on the amount borrowed. This may be the same as the loan amount, but often isn't. In the example given the assumption made is that they are the same from the beginning of the draw period to the conpletion of the repayment period.
    • Another assumption in the example is that the interest rate stays the same throughout the term of the loan. This is possible but remember that most HELOCs have a variable rate.
    • At the beginning of your HELOC there is no monthly payment until you start using the funds. There might be an annual maintenance fee even if you don't borrow anything.
    • Using the assumptions in this example, if you borrow $50,000 after 5 years, the monthly draw period payment of $204.17 will begin at that point and the repayment period payments will be just as shown in the example.
    • Whatever amount you borrow, you could start to make principal payments during the draw period, subject to the terms and conditions of your loan. If all the principal is paid off during the draw period, there will be no payments due during the repayment period.
    • At the bottom of the bank offered calculator, you can click on "Email Results" to get the results emailed back to you. You will be asked for a small amount of personal information and give the bank permission to contact you. If you don't want to do that, you can right click on the results and print them.

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  22. Is There Another Way To Calculate A HELOC Payment?

    If you don't use a HELOC Payment Calculator, you still need to start with the same variables. And I think that you should keep in mind the points I made above for clarity. In the example given the interest rate is 4.9% and the amount borrowed is $50,000. Multiply those together = $2450. Divided by 12 = $204.17. That is the monthly payment during the draw period just as provided by the HELOC calculator. To determine the monthly payment during the repayment period which is ten years or 120 months, use a financial calculator and enter 120 N, 4.9 I and 50000 PV = $527.89 per month. This is the fully amortized payment of principal and interest.

    Some of you are probably wondering what happens when the interest rate changes. Or let's say that you have a current balance and then you borrow more. If either or both changes take place in the midst of a payment period, the current month's payment will be a blend based on the number of days that each factor applies. You could just let the bank figure that month's payment, realizing that the following month will be calculated just as above.

    If you need to be more precise, determine the daily interest rate, and apply that to the average daily balance.

    For example, you have a balance of $20,000 and on the 15th of the month you borrow $10,000 more. Let' assume that the interest rate is 4.9%, or .049 for the entire month, and the month has 31 days. .049 divided by 365 = .0001342, your daily interest rate. 14 days multiplied by $20,000 plus 17 days multiplied by $30,000 = $790,000 divided by 31 days in the month = $25,483.87, your average daily balance.

    $25,483.87 average daily balance x .0001342 daily interest rate x 31 days = $106.02 monthly payment.

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  23. What Is The difference Between A Home Equity Line Of Credit And A Home Equity Loan?

    Both are sources of funds that require equity in your home. Based on the amount of money that you qualify for, the home equity loan provides that money at the start of the loan period. At the same time you also begin making payments for the principal plus interest.

    The home equity line of credit starts by advising you the amount you qualify for. Like a credit card, you only borrow money when you decide to. You pay interest on the amount you borrow, which is often less than the amount that you qualify for.

    A home equity loan has a fixed interest rate while the HELOC has a variable rate. The rate on the home equity loan is usually higher than the starting rate on the HELOC.

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  24. Can A Heloc Be Used For Anything?

    If you look at the marketing banks use about HELOCs, they can be used for anything. Examples include home improvements, debt consolidation, emergency expenses, student loans and business expenses. Of course it's a good idea to look at the fine print of the loan documents to see if their are any exclusions. Here is an interesting article at figure.com titled Top 6 Ways To Use A Home Equity Line Wisely. Figure is a financial services company using blockchain.

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  25. Is It Smart To Use A Heloc To Pay Off A Mortgage?

    Doing so might be a good choice for you depending on the financial numbers and your HELOC documentation. The basic idea is that if you can get a HELOC at a lower interst rate with low or no closing costs, it is a cheper way to pay back your mortgage. Whether it is smart depends on your personal details. Another consideration is what is a better use of the funds from the HELOC?

    If you look at bank websites for advice about this question, bear in mind that while you will find some worthwhile information, the banks have the bias of wanting business. And be careful about the information provided by banks that do not offer HELOCs. What they say may be slanted toward moving you away from applying for a HELOC.

    If you are looking for an alternative resource, consider this article from Investopedia titled "Should You Pay Off Your Mortgage with a Home Equity Loan?" While the article has some helpful information, there is room for more accuracy.

    This article compares the options of using a Home Equity Loan to a Home Equity Line Of Credit as methods to pay off your mortgage. They suggest that Home Equity Loans are also called second mortgages. While it is not wrong to do so, their explanation is misleading.

    Mortgages are recorded at county clerks offices to make them valid public documents. What is being referred to as "your mortgage" in such articles, is the first mortgage because it was the first mortgage recorded for the current ownership. The next mortgage recorded for that property is the second mortgage no matter what the source of funding. In that case both the Home Equity Loan and the Home Equity Line Of Credit would be second mortgages.

    The article has a section titled "2. Home Equity Lines of Credit (HELOCs)" They cover some of the differences with Home Equity Loans. In the second paragraph of that section they state "To begin with, HELOCs do not give the lender a lump sum at the start of the loan." It should say "borrower" not "lender.'

    Finally there is a section titled "What happens to my HELOC when I pay off my mortgage?" Here's what they say: "When you pay off your mortgage, the HELOC would be paid off at the same time. For example, if you sell your house, then before you receive any of the proceeds of the sale, both your mortgage and your HELOC would need to be paid off first. The lenders would have first claim on the proceeds from the sale." The first sentence is not correct but the example is the condition that would make it correct. Let me clarify.

    What happens to your HELOC when you pay off your mortgage (meaning your first mortgage), depends on whether you sell your home at the same time. If you pay off your first mortgage but don't sell your home, your HELOC remains in place subject to the terms of the HELOC. If you sell your home, any mortgages against that property come due. So the proceeds from the sale of your home will be used to pay off the existing mortgages, unless you find some other way to handle them, such as substitution of collateral (See number 32. below).

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  26. How Does A Heloc Affect Your Credit Score?

    A HELOC affects your credit score much like other uses of credit do. There are two key sources that provide credit scores to all users. The FICO Score and the VantageScore. Their formulas vary somewhtat and they both have more than one version. Both sources use six categories of information about individuals to compute their scores.

    Payment history, credit utilization and derogatory remarks have a high impact. Credit age has a medium impact. Total number of accounts and number of hard inquiries have a low impact.

    Whatever your credit scores are at present, they continue to change in small or large amounts based on your credit activity and the timing of what gets reported. To better understand the affect of a HELOC, let's assume no other changes temporarily.

    When you apply for a HELOC that counts as a hard inquiry. More hard inquiries lead to a small reduction in credit scores. The amount of reduction depends on how many hard inquiries are currently part of your credit history. Hard inquiries stay in your credit history for up to two years, but affect your credit score for a shorter time period. The good news is that when you shop around for a specific form of credit, such as a HELOC, as long as you do so in a short amount of time, the applications get grouped together as one inquiry. That time period is 14-60 days depending on the formula used.

    Payment history is the most important factor in credit scores, so if you are approved for a HELOC, making timely payments will help your credit score. Missed payments have a negative impact.

    Being denied for credit does not impact your credit score. So don't get confused that if your application for a HELOC is denied, it's considered a derogatory remark. It isn't. Likewise if your application for a HELOC is approved, the approval will not impact your credit score. But someone reviewing your credit and seeing that you were approved for a HELOC may get a favorable impression. They will also realize that you have this additional source of funds, which could be used as an emergency fund if needed.

    As mentioned credit age has a medium impact on your credit score. Credit age is based on the average age of your open accounts. So if you get a HELOC, this will reduce the average age of your open accounts. This is tempered by the fact that you get another credit account. Increasing the number of your total accounts will have a low, but positive impact on your credit score.

    Credit utilization has a high impact on your credit score, and I think there is a good opportunity to learn something here. The credit utilization ratio is the amount of credit being used divided by the amount of credit available. The lower the rate the better is your credit score.

    A common error is believing that a HELOC is part of credit utilization. It is not. You will find articles provided by reputable sources that make this mistake. You might even find a source that on one hand tells you that a HELOC is not counted in the credit score if you apply for another loan. But on the other hand they say that the unused credit line from the HELOC is added to the credit utilization formula. It is not. Here is what FICO has to say about it:

    "Home Equity Lines Of Credit are an odd hybrid, offering the convenience of revolving credit and the security of a real estate-backed loan.  Perhaps that’s why lenders are sometimes puzzled about the role of HELOCs in calculating FICO® Scores.

    For instance, we often get asked whether HELOCs factor into the FICO® Score’s calculation of revolving credit utilization. We’re also asked what happens to the score if the HELOC's credit limit is reduced or the trade line is closed by the lender.

    HELOC accounts can be reported to credit bureaus in different ways.  To the extent that a HELOC is readily identifiable on the borrower’s credit report, the FICO® Score will be unaffected by either a credit line reduction or account closure.  At the same time, payment history and other aspects of the HELOC account can influence the FICO Score calculation.  On-time payments can gradually increase the borrower’s score while any reported delinquency can naturally lower it.

    Who closes an account – the lender or the borrower – doesn’t matter to the FICO® scoring model. The model treats “closed by credit grantor” the same as other closed indicators, such as “closed by consumer.”  This holds true for FICO 8 Scores as well as for previous versions of the FICO scoring model."

    Part of the magic of a HELOC is that it can still help you improve your credit utilization. You can do this by using your HELOC to pay off your credit cards. Since your credit cards are the main source of credit utilization for most people, you can improve your credit score by transferring some of this debt to your HELOC. What's best depends on your personal situation.

    Sources: Credit Karma, FICO, The Balance

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  27. What AreThe Disadvantages Of A Heloc?

    It depends how you use it. It also depends what you compare it to. Any time we humans have a source of credit there is the chance that we will lack discipline in how we utilize it. So you can't really attribute that to the HELOC itself. But there is still real danger that we will spend beyond our means and this will lead to more problems in the future.

    Other sources suggest that one disadvantage is that you could lose your home. Of course that can happen for plenty of other reasons without a HELOC. By the same reasoning you could also say that it's a disadvantage of a first mortgage or a home equity loan, that you could lose your home. But buying a home usually means that you also get a mortgage. That provides many benefits including the equity you build by making your mortgage payments. In turn that equity can be used to obtain a HELOC. While that is not a decision to take lightly, no matter how well you manage your finances, at some point things may not go well. But watch out for banks that don't offer HELOCs and use marketing that makes them sound more scary.

    One opinion suggests that a set draw periond is a disadvantage. But that draw period is typically ten years. So that gives you plenty of time to make good use of it. The fact that HELOCs have a variable interest rate can also be viewed as a disadvantage. But that depends on your timing and your alternatives. There is reason that HELOCs can be more difficult to qualify for than other sources of credit. So if you do qualify that's an indication that you are qualified to make the best use of it.

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  28. Can I Fix The Rate On My HELOC?

    Some lenders allow this option. This is something you should investigate when shopping for a HELOC. So you might be able to obtain a fixed rate when you start your HELOC. Or you might be able to fix the rate on your HELOC balance at a later date. But neither approach will be available for some offers. For HELOCs that begin with a fixed rate, that rate will probably be higher than variable rate alternatives. There may also be higher fees and a higher penalty for an early pay off. Determine what you qualify for and evaluate the trade offs.

    Source: MarketWatch

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  29. Why Should Everyone Get A HELOC?

    This is certainly a strategy worth implementing. Considering all the positives mentioned above, there are plenty of uses for a HELOC. Even if you don't need it now, it's a great rsource to have for the next ten years. During that time frame, you may use it several times. Just having it as an emergency fund alone is a good reason to get one. The key is that you can qualify for one. At a time in the future when you could be more motivated to apply for a HELOC, you may not qualify based on the changes in your circumstances that actually lead to that motivation.

    Perhaps you don't qualify for a HELOC now because you don't have enough equity, your income is insufficient, or your credit score is too low. Each of those reasons are probably characteristics that you hope to improve on. As part of your long term financial planning, having a HELOC at your disposal could add to your motivation for improvement.

    Source: Sagevest Wealth Management

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  30. Can You Use A HELOC To Acquire Investment Property?

    Yes you can. This is a different concept than typical uses of a HELOC. For many other purposes you are using the HELOC to pay for a known cost. An investment property has both fixed and variable costs, and like other investments has a certain amount of unpredictablity. So it's important that you run your numbers carefully and allow for cost overruns.

    If your plan is to buy and hold as rental property, it could be tough to cash flow using a HELOC. Of course this depends on your personal situation and each property stands on its own. Doing a flip may be easier especially if you have credible experience in this niche. In that case a HELOC could be a great source of funds for investment property, either on its own or in combination with other sources. Perhaps you could use another source to purchase the property and use the HELOC for the rehab funds. Likewise if you buy rental property using another resource, the HELOC could be really helpful as a source of working capital moving forward.

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  31. Can I Take Out A HELOC On Investment Property?

    Note that this question is slightly different than the one above. Here you already own the investment property, and you are attempting to get a HELOC using the investment property as collateral, rather than your personal residence. This can be done but poses some additional challengers. Of course the first challenge is getting to the point where you have enough equity in your investment property to qualify for a HELOC. Next, not all lenders that offer HELOCs do so on investment property. Further, investment property is considered riskier collateral than a personal residence so it probably will be more difficult to qualify for. If you are self-employed it may also be more difficult to prove income. If you do qualify, there may be an opportunity to do a series of such tranactions.

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  32. Is There An Alternative To Paying Off My HELOC When I Sell My Home?

    On a limited basis, substitution of collateral might work. This method is more likely with seller financing and other sources of private money. It is also more likely with investment property, but might work with a personal residence as well. Before reading on here, I suggest that you take a look at my article The Pros And Cons Of Seller Financing - Part 2. Scroll down to the section "Is Substitution Of Collateral A Pro Or A Con?." This will help you understand the concept.

    Let's say you have a HELOC secured by an investment property, and sell that property. If you own other property with sufficient equity, you could ask the lender to substiute collateral rather than pay off the HELOC. This approach could save you time and fees involved in applying for a new HELOC. Substitution of collateral might also work if you sell your home, and downsize into a new one. The idea being that the sale proceeds from your current home, will leave you with enough equity in the new home to still qualify for the HELOC.

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  33. If I Don't Qualify For A HELOC, Then What?

    Why did you apply for a HELOC? Beginning with this question may help you decide what to do next. If you have an immediate need for funds, than keep looking, As mentioned, if you apply for a HELOC at a number of lenders within 14-60 days, this will count as one hard inquiry for your credit score. It should be easier for you to qualify for a home equity loan or a credit card. Private money is another option to consider.

    Why didn't you qualify for a HELOC? Whatever the reason(s) gives you helpful input. Perhaps you need to improve your credit score. For helpful ideas you could start at number 20. above. It really helps to have a clear understanding of credit score formulas and how your actions affect each component of the formulas. Then you could develop a strategy to implement that will increase your score, and keep it there over time.

    If you lack sufficent equity, that should improve over time, but could be too slow to meet your needs. The idea behind a HELOC is to use an asset, the increased equity in your home, to obtain a line of credit. So you are trading the value of an asset you own, for a credit line, while taking on an obligation to pay back the funds you borrow. Do you have any other assets you could utilize instead? See number 34. below.

    If you gained nothing else by applying for a HELOC it's good practice. Now that may sound dumb, but consider the value of this learning experience. For starters there is the process of applying for the loan and all the information you were required to provide. You may have found the process distasteful, and would prefer to deal less with banks in the future. Or you may be feeling empowered for such dealings. What did you learn about the bank(s) you worked with. Who do you want to do business with in the future?

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  34. Do You Have Any Notes You Could Sell?

    This might be an option if you apply for a HELOC but don't qualify. It could also be an option instead of even applying for a HELOC. If you collect payments on a secured promissory note that you hold, that stream of payments is an asset that you can sell for a lump sum of cash. Whole or partial sales are possible, structured to meet your needs. For more information please start at my home page or go here directly for a quote.

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