When it comes to stable access to a line of credit, a credit card is a famous option that allows you to borrow and pay back in a set duration. In the scenario where you have to spend a lot of dollars on your home remodelling, buying another house, or settling a debt, there are several other options apart from a credit card. Let’s discuss the home equity line of credit further (HELOC).
What is home equity lines of credit in Utah?
This credit facility enables the users to borrow money for more enormous expenses such as home renovation, remodelling, etc. In case you fail to settle the payments towards your credit amount, the lender has the liberty to utilize your place as collateral. That is why HELOC or home equity line of credit intimidates the borrowers. Nonetheless, it offers some benefits which we don’t get in other kinds of credit.
How does a home equity line of credit work?
HELOC is quite similar to a credit card, where you can spend up to the specified limit under the credit limit and pay it back in the stipulated duration. When you pay the balance month-wise, the available amount in the credit is renewed. That’s how HELOC functions. However, the only difference here is that you borrow the bucks against the share in your home to set the line of credit. Therefore, to avail yourself of the line of credit, you must own a home and equity in that. Nonetheless, bear in mind that lenders also consider credit score and debt-to-income ratio, bill payment records, etc., to approve a home equity line of credit (HELOC).
The line of credit has two parts, the draw period and the other is repayment period. In the former, a person can derive an amount up to a set limit, repay it, and repeatedly borrow until the end of the draw period. Furthermore, HELOC also allows variation in the interest and fixing it. As the period comes to an end, borrowers can withdraw no more money. Once the draw period ends, the repayment period starts, generally lasting for 10 to 20 years. During this period, you need to reimburse the monthly principal amount and interest on the remaining line of credit balance.
This is all you need to know about home equity lines of credit in Utah.