Homeowners who have equity in their homes have flexibility in selecting how to access that equity. Some homeowners choose to refinance the entire first mortgage employing a cash-out refinance. Some choose to acquire a fixed-rate next mortgage. Other people prefer to get a home equity line of credit, or HELOC, as a second mortgage. Such loans are a line of credit drawn from the equity of the home. Homeowners can pay off a HELOC and re-access the loan anytime throughout the withdraw period.
Contact banks and mortgage brokers in your area. Ask for a HELOC quote for your home. Each lender’s provisions will differ. Some lenders’ rates may be better but may not lend as much money on your property. Make sure you contact any banks you have accounts with, as they may provide better terms for existing customers.
Apply for the loan with the lender of your choice. Your lender may request proof of your income and the value of your dwelling. If you bought your home in the last six months, provide the lender with a copy of your appraisal. The lender may still wish to receive its own evaluation but this can give it a fair idea of your home’s worth meanwhile.
Make sure to completely understand the conditions of your loan. Most HELOCs have adjustable rates that change when the prime rate does. The Wall Street Journal publishes the prime rate. The prime rate is referred to as your index on your mortgage note. Your loan may also have a margin, or a percent above or below the index. Combining the index and margin gives you your real interest rate. If your index is .75, your interest rate will be the prime rate plus .75 percent. If your index is -.5, then the speed is going to probably be the prime rate minus.5 percent.