3 things to consider before getting a home equity line of credit
If you're considering taking out a home equity line of credit (HELOC), there are a few things you should know first.
A HELOC is a revolving line of credit that's secured by your home equity. You can use the funds for anything you want, and you only have to make payments on the amount you borrow.
Sounds great so far, right?
But there are a few things you should consider before taking out a HELOC, including the fees, the repayment terms, and the impact on your credit score.
Most HELOCs have closing costs, just like a mortgage. These can include an appraisal fee, origination fee, and other miscellaneous fees.
Some HELOCs also have an annual fee, which can add up over time.
2. Repayment terms
HELOCs typically have a draw period, during which you can borrow money as you need it. After the draw period ends, you have to start repaying the loan, plus interest.
The repayment terms can vary depending on the lender, but most HELOCs have a 10-year repayment period. That means you'll have to start repaying the loan in full after 10 years.
3. Impact on your credit score
Opening a HELOC will result in a hard inquiry on your credit report, which can temporarily lower your credit score.
If you're considering a HELOC, it's important to compare the costs and benefits before making a decision. Be sure to shop around and compare offers from several different lenders to get the best deal.