Is Your HELOC Really a HELOC?
Dec 23, 2022
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Table of Constance
#1. What is a Real HELOC
#2. Red Flags Pointing to False HELOCs
#3. Want a HELOC with No Strings Attached?
Did you know that not all consumer financing products that advertise as a home equity line of credit are actually a tried-and-true HELOC? There are plenty of real HELOCs on the market, but there are also plenty of products that are marketed as a home equity line of credit — even though with a closer look, they have strings attached. Here’s what to look out for so that you can read between the lines and pursue the most advantageous HELOC option for you.
#1.What is a Real HELOC?
Before we cover what you should look out for to identify products that aren’t actually HELOCs at all, let’s explain a textbook definition of a real home equity line of credit.
A traditional HELOC is a revolving line of credit that you can flexibly pay down and pull out of.
With a true HELOC, you should be able to pull out any amount within your credit line, even $100,000 if available to you, without having to use it or pay interest.
While textbook HELOCs do have draw and repayment periods, where you can pull from your credit line and then pay back what you owe, you do not need to take out money first in order to activate your line of credit.
With an authentic HELOC product, you will have complete control over how and when you use your credit line.
#2.Red Flags Pointing to False HELOCs
Now that we’ve analyzed what a true HELOC should look like, let’s look at some of the red flags that identify “strings attached” home equity lines of credit offers.
One of the biggest things to look out for are offers that require you to pull out a certain amount when you first open your home equity line of credit.
Some products on the market as a HELOC will come with terms that require homeowners to pull out a certain amount of money and always have that revolving and in use.
For example, this may look like an offer that requires homeowners to take out $25,000 and always keep a $25,000 balance revolving on their credit line.
This is not a true HELOC. This type of offer is more like a fixed-amount loan that uses your home equity as collateral.
While this may seem similar to a HELOC, a real HELOC is intended to be much more flexible and come with fewer restrictions and requirements. If you are seeking a HELOC and end up with a funding situation like this, you could be missing out on the benefits that you were originally pursuing.
Another red flag to keep an eye out for is when the supposed HELOC requires that you have a certain amount of the credit line in use at all times. This situation would inevitably end up requiring you to pay more interest over time as you always have a principal balance that’s rolling over.
With a real HELOC, you should be able to enjoy the freedom and flexibility of using — or not using — your home equity line of credit. Any deviations from the typical draw and repayment schedule should only be accepted if it benefits you as a homeowner.
For example, the Hitch HELOC strives to help homeowners take greater control of their financial futures by offering a ten-year interest-only repayment plan. This allows homeowners to manage their expenses and balance out the new financial obligations of their HELOCs.
#3.Want a HELOC with No Strings Attached?
If you’re looking for a true HELOC product, look no further than Hitch.
Hitch is revolutionizing the way homeowners have access to home equity lines of credit by fostering a fully online process — creating a fast and easy application and underwriting experience.
In the past, HELOCs have been traditionally difficult to get approved for. There were strict application requirements, long underwriting processes, and many hoops to jump through. Our digital process alleviates the friction involved with tapping into your home equity through a HELOC.
Today, Hitch is one of the only online providers that offer a pure HELOC product with no strings attached.
When you choose to work with Hitch, you can feel confident knowing that your home equity line of credit is authentic and aligned with your best financial interests.
In addition to our homeowner-friendly HELOCs, Hitch is dedicated to providing homeowners with tools that can help them achieve long-term financial wellness.
If you’re interested in learning more about the Hitch HELOC, visit our website. Want to know how much equity you have available? Use our free home equity calculator. Or, get a quote today to take the first steps toward your home equity line of credit.
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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.