Is a HELOC Right For You?
#1. How Much Equity Do You Have?
#2. What Does Your Credit Score Look Like?
#3. Do You Have a Plan For Using the Funds?
#4. Are You Currently Paying High Interest and Fees on Credit Cards?
#5. Next steps
Is a HELOC the right move for you? You have probably been reading about HELOC's, and if it sounds like a great option. You’re likely trying to figure out whether a home equity line of credit can help your financial outlook. Below are the top things to consider when looking to get a HELOC!
Before deciding to pursue a home equity line of credit, one of the most important things to consider is how much equity you have accumulated throughout your time as a homeowner.
Equity calculates how much of your home’s value you actually own. When you buy a home, you begin building equity by submitting the initial down payment. As you pay off your mortgage principal every month, you slowly build more equity.
If you plan on tapping your equity with a HELOC, you want to make sure that you have enough equity to access. Finding out how much equity you have can provide you with the insights needed to make a decision about whether a HELOC is right for you — and if now is the right time to get one.
We recommend using our reliable home equity calculator to help you determine your current equity.
Like any consumer financing tool, your credit score plays a big role in determining your overall HELOC offer.
Just like a mortgage loan, the interest rate applied to your home equity line of credit will vary based on your eligibility as a borrower.
A robust credit score positions you as a strong borrower, which may help you gain access to beneficial terms like competitively low interest. Having a good credit score when you apply for your HELOC can help you save money down the line when it comes time to pay off your home equity line of credit.
While your credit score may not be the make-it-or-break-it point as you decide whether or not a HELOC is right for you, it is important to understand how your credit will impact the long-term experience you have with your home equity line of credit.
At Hitch, we often find that homeowners are able to boost their credit scores by as much as 45 points by leveraging Experian’s Score Boost tool. Experian allows you to provide payment history for certain bills that do not get reported to the credit bureaus. Click here to learn more!
In most cases, homeowners get HELOCs for a specific reason. As you’re thinking about how a HELOC will fit into your financial situation, you should consider whether or not you actually have a plan to use the funds.
A popular reason that homeowners apply HELOCs is to cover the upfront costs of high-ticket expenses. Common reasons why homeowners get HELOCs include:
Since many people take out a HELOC to fund home renovations and property upgrades, it’s possible to increase the value of the home by strategically planning out the remodeling project.
Having a specific plan to leverage the funds from your HELOC can help you spend responsibly, helping you manage your home equity line of credit in the long term.
Escaping from high-interest credit cards is a major reason why homeowners choose to apply for a home equity line of credit.
Since credit cards are unsecured forms of borrowing — where no collateral is put down to guarantee repayment — the interest applied to your rollover balances is incredibly high.
However, a HELOC uses your home equity as collateral to boost your borrowing eligibility and reduce the risk for lenders. This allows the interest rate on a HELOC to be much lower than that of a general credit card.
Hitch also offers longer terms of 5, 10, 15, and 30 years — allowing you to access a lower monthly payment. Additionally, Hitch HELOCs have fixed rate options that are popular with homeowners rolling over funds from high-interest variable rate credit cards.
Being tired of high-interest borrowing fees is one of the biggest reasons why homeowners choose to put their equity to work and improve their financial well-being.
If you’re a homeowner who uses credit cards to finance spending, you might be able to access substantial savings by transitioning to a low-interest HELOC.
After reading these four considerations, you’ve probably gained more confidence about your HELOC eligibility.
Whether you will be taking the next steps toward your home equity line of credit now or in the future, your first step should be to get connected with Hitch.
With Hitch, you get quick access to your home equity — no long waiting periods of perfect credit scores required. If you’re ready to check your HELOC offer with Hitch, get a free quote today!
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