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5 Effective HELOC Strategies for Smart Homeowners


May 7, 2023



If you are a homeowner, one financing option available to you is a home equity line of credit (HELOC). A HELOC allows you to borrow money using your home as collateral, which can be a useful tool for many purposes such as home renovations, debt consolidation, or emergency expenses. However, before you decide to take out a HELOC, it is important to have a strategy in place to ensure that you use the funds wisely and avoid potential financial pitfalls. In this article, we will explore some effective HELOC strategies that can help you make the most of this financial tool.

Determine Your Purpose


Before taking out a HELOC, it's crucial to identify the reason why you need the funds. HELOCs can be used for various purposes, such as home renovations, debt consolidation, or emergency expenses. By having a clear purpose, you can make informed decisions about the amount you need to borrow and the terms of your HELOC.

For example, if you're planning to use the funds to consolidate high-interest credit card debt, you can calculate the amount needed to pay off the debt and choose a HELOC with a lower interest rate to save on interest costs.

Shop Around for the Best Rates


Like any other financial product, the interest rates and terms of a HELOC can vary significantly among lenders. Before applying for a HELOC, it is important to shop around and compare offers from multiple lenders. Look for a lender with competitive rates, low fees, and flexible repayment terms. Make sure to read the fine print carefully and understand any potential risks or costs associated with the loan.

For example, you can compare interest rates, closing costs, and other fees among different lenders to select the best option.

Use HELOC Funds Wisely


A HELOC can be a powerful tool for financing your goals, but it can also be risky if you do not use the funds wisely. Avoid using HELOC funds for frivolous expenses or unnecessary purchases, as this can lead to increased debt and financial stress. Instead, focus on using the funds for purposes that will improve your financial situation over time, such as home improvements or debt consolidation.

For example, if you're using the funds for home renovations, you can prioritize projects that increase your home's value, such as upgrading your kitchen or bathroom.

Make Timely Payments


Just like any other loan, it is important to make timely payments on your HELOC to avoid late fees, penalties, and damage to your credit score. Set up automatic payments or reminders to ensure that you do not miss a payment. If you are struggling to make payments, consider contacting your lender to discuss your options and avoid defaulting on the loan.

For example, you can set up automatic payments from your bank account or calendar reminders to ensure that you don't miss any payments.

Have an Exit Strategy


Finally, it is important to have an exit strategy in place before taking out a HELOC. This means having a plan for how you will repay the loan in full, either by selling your home, refinancing, or paying off the balance over time. Avoid relying on future income or market conditions to pay off the loan, as this can be risky and lead to financial stress down the line.

For example, you can create a repayment plan that aligns with your budget, or you can refinance the HELOC into a fixed-rate loan to avoid any potential payment increases in the future.

By implementing these HELOC strategies, you can make informed decisions about your loan and use the funds wisely to achieve your financial goals.

Get a quote from Hitch today!

Ready to unlock the value in your home and make smart decisions? Get a quote from Hitch today and experience the benefits of our digital HELOC platform. Our streamlines process, personalized approach, and commitment to your financial health make is the ideal choice for your home equity needs. Don't wait, take control of your finances with Hitch!

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Equal Housing Lender

Hitch, Inc. NMLS #2383367 #2383367

2158 NW Toussaint Drive. Bend, Oregon 97703

1. Qualified applicants may borrow up to 95% of their home’s value. This does not apply to investment properties.

2. HELOCs have a 10-year draw period. During the draw period, the borrower is required to make monthly minimum payments, which will equal the greater of (a) $100; or (b) the total of all accrued finance charges and other charges for the monthly billing cycle. During the draw period, the monthly minimum payments may not reduce the outstanding principal balance. During the repayment period, the borrower is required to make monthly minimum payments, which will equal the greater of (a) $100; or (b) 1/240th of the outstanding balance at the end of the draw period, plus all accrued finance charges and other fees, charges, and costs.The lender will calculate this amount by taking the outstanding Account Balance on the last day of the draw period and dividing it by 240 months and then adding any finance charge that accrues but remains unpaid during the monthly billing cycle plus any other fees, charges and costs to the fixed principal payment that is due. During the repayment period, the monthly minimum payments may not, to the extent permitted by law, fully repay the principal balance outstanding on the HELOC. At the end of the repayment period, the borrower must pay any remaining outstanding balance in one full payment.

3. The time it takes to get cash is measured from the time the Lending Partner receives all documents requested from the applicant and assumes the applicant’s stated income, property and title information provided in the loan application matches the requested documents and any supporting information. Most borrowers get their cash on average in 21 days. The time period calculation to get cash is based on the first 4 months of 2024 loan funding's, assumes the funds are wired, excludes weekends, and excludes the government-mandated disclosure waiting period. The amount of time it takes to get cash will vary depending on the applicant’s respective financial circumstances and the Lending Partner’s current volume of applications. Closing costs can vary from 3.0 - 5.0%. An appraisal may be required to be completed on the property in some instances.

4. Not all borrowers will meet the requirements necessary to qualify. Rates and terms are subject to change based on market conditions and borrower eligibility. This offer is subject to verification of borrower qualifications, property evaluations, income verification and credit approval. This is not a commitment to lend.

5. The content provided is presented for information purposes only. This is not a commitment to lend or extend credit. Information and/or dates are subject to change without notice. All loans are subject to credit approval. Other restrictions may apply.