What is a Home Equity Line of Credit?

A home equity line of credit, or HELOC, is a second mortgage that gives you access to cash based on the value of your home. You can draw from a home equity line of credit and repay all or some of it monthly, somewhat like a credit card.

With a HELOC, you borrow against your equity, which is the home’s value minus the amount you owe on the primary mortgage. You can also get a HELOC if you own your home outright, in which case the HELOC is the primary mortgage rather than a second one.

How a HELOC works

Much like a credit card that allows you to borrow against your spending limit as often as needed, a HELOC gives you the flexibility to borrow against your home equity, repay and repeat.

HELOCs are tied to the PRIME rate index and therefore, have adjustable interest rates. This means that as the Federal Funds Rate goes up or down, the interest rate on your HELOC will adjust, too.

To set your rate, the lender will start with an index rate, then add a markup depending on your credit profile, loan-to-value and transaction type. That markup is called the margin, and you should ask to see the amount before you sign off on the HELOC.

Is getting a HELOC a good idea?

Whether a home equity line of credit is a good idea really comes down to your goals and financial situation. A HELOC is often used for home repairs and renovations, which can increase your home’s value. In general, a HELOC has a much lower interest rate than a credit card. 

Some use home equity lines of credit to pay for education, but you may get better rates using federal student loans. Financial advisors generally don’t recommend using a HELOC to pay for vacations and cars because those expenditures don’t build wealth. 

To apply we need an application:

For loan details visit:

Once the application is completed you will receive a link to upload: 

  • Current mortgage statement 
  • Proof of Insurance
  • 2 years tax returns
  • 2 years W2
  • 1-month paystubs

Home Equity Line Of Credit Basics 
The Rate is tied to Prime (currently 3.25) with a margin of 1.5-2% (and can be higher depending on credit,loan to value, line amount etc.) Line amounts from $50,000 to $500,000Fees run $1500-$2000 or so with title and appraisal etc. An automated valuation may be used in lieu of a full appraisal.  We find this out AFTER submission.There is a minimum draw at funding of $50K required.Closing is less than 30 days typically

 

All loan approvals are conditional and not guaranteed and subject to lender review of all information. Loan is conditionally approved when lender has issued approval in writing, but until all conditions are met, loan cannot be funded. Specified rates and [products may not be available to all borrowers. Rates subject to change according to market conditions and agreed upon lock times set by borrower. Fresh Home Loan Inc. is an Equal Opportunity Mortgage Broker in California. This licensee is performing acts for which a real estate license is required. Fresh Reverse is a dba of Fresh Home Loan Inc.  Fresh Home Loan, Inc. is licensed by the California Department of Real Estate #02137513 NMLS # 2124104 

Garrick Werdmuller

garrick@freshhomeloan.com
(510) 626-9100