One of the benefits for homeowners in the current real estate market is the equity they’ve been able to build in their homes.
Equity is the difference between what you owe on your home and how much it’s worth, and it can be used to borrow funds through a HELOC, or a Home Equity Line of Credit. Essentially, you can borrow a percentage of the equity you have – at Peoples Bank, between $20,000 and $1 million, depending on the value of your home.
As people try to make smarter choices amid inflation and higher borrowing costs and ensure their money is working its hardest for them, HELOCs also have certain benefits.
Interest rates are considerably lower than those of credit cards, for example, and for the first 10 years of your HELOC through Peoples Bank, you’re only required to pay the interest. You can, however, pay down the principal at any time. At the 10-year mark, any outstanding funds will be converted to a loan that becomes amortized over 20 years.
Once you’re approved for a HELOC, what you do with the funds is up to you.
- Home improvement – One of the most popular uses for a HELOC in today’s real estate climate is for home renovation. Rather than worrying about the costs of moving – assuming you can find a home you love – with a renovation you can create the home you want, whether with more space, new features, or updates.
- Debt consolidation – Another of the most popular uses for a HELOC is to consolidate existing debts, such as high-interest credit cards, into a single loan with a much lower interest rate. This lets you tackle the debt much quicker.
- Emergency expenses – It’s important to expect the unexpected, whether a leaky roof or medical expenses. It’s one reason I encourage those who have equity in their home to apply for a HELOC before it’s needed. You may never need to use it, but you want to know it’s available if you do – whatever life throws at you, a HELOC can help you catch it.
- College expenses – As children eye college, you may question how you’re going to pay for it, and the equity in the family home can be the answer.
- Any purchases – Long story short, you can buy anything with a HELOC, and many appreciate having funds available to act quickly when they spot their dream ride at the classic car auction or the ideal time-share in their travels. When you make a purchase, you have the option to lock it in at a set interest rate within the line of credit; as you pay down that segment, funds become available once more within the HELOC.
While a HELOC offers a variety of benefits, it’s important to consider it in conjunction with your long-term goals, including paying down your loan. One of the benefits of working with a community bank is our personal approach to banking, the flexibility we offer, and the fact that decision-making is also local.
In addition to working with you to secure your HELOC, we can also help create a plan to pay it down. We can calculate how much you’ll need to pay to achieve the timeframe you’re looking at, and we can set up an automatic payment schedule to help keep you on track.
Working with a community bank offers that personal touch – you come to us with your goals, and we’ll help you reach them.
Visit a Peoples Bank lending specialist today to learn how to make your home equity work harder for you.
By Jessica Lembo, Peoples Bank District Branch Manager