How a Home Equity Line of Credit Can Work for You.
According to Black Knight® Mortgage Monitor data, Americans are currently sitting on a record $6.2 TRILLION in home equity. Does this make it a good time to tap into your home’s equity?
Home equity lines of credit (HELOCs) allow you to borrow against the equity (the “stored-up dollar value”) of your home – the difference between your existing balance and the appraisal value. Current appraisal values are at all-time highs for many and this difference in mortgage balances and appraisal values combined with low interest rates are currently making HELOCs an attractive cash flow option for several reasons.
The first would be home improvements. 62% of homeowners are planning to make improvements to increase the value of their homes.1 Another great reason for a HELOC is the ability to pay-off high-interest debt such as credit cards. The national average for HELOC rates is about 4.9% APR.2 The national average interest rate for credit cards is 17.87% APR.3 That’s a big interest rate difference. Using those interest rates to pay off $15,000 in credit card debt over three years, as an example, would save you about $3,300 with a HELOC.
The other reason for having a HELOC is security. Having a line of cash you can tap into should there ever be a financial need or – hopefully not – emergency, is also an attractive option for many homeowners. Another benefit may be the interest you pay could be tax deductible.4
While there are considerations to make whether to get a HELOC or not, now may be the best time to do it. Many larger banks have temporarily halted applications for HELOCs over the past couple months due to anticipated demand. If you are interested in a HELOC, US Eagle currently has a HELOC offer you may wish to check-out. It’s a source of cash that, while not free (and what cash sources aren’t?), is something that’s “on the house.”
1Results of Craftsman Built@Home survey.
2Based on CNBC Personal Finance research. APR=Annual Percentage Rate.
3Based on WalletHub credit card research.
4Consult your tax advisor regarding tax deductibility.