Benefits of Taking Out a HELOC

Blog posted On February 03, 2022

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Charging expenses to your credit card may seem easy, but it can cost you more in the long run.  Credit card interest rates are typically much higher than mortgage rates and maxing out lines of credit can be bad for your credit score. A good alternative to using your credit card is getting a Home Equity Line of Credit, or HELOC.

What is a HELOC?

A home equity line of credit is a revolving source of funds like a credit card. But unlike a credit card, a HELOC is linked to your home equity. When you withdraw funds, it comes from your home equity rather than your bank account. Your untapped funds (in your home equity) do not charge interest.

A HELOC is beneficial for many different reasons. It can help current homeowners put their passive equity to good use and potential home buyers purchase more expensive homes.

HELOC benefits for homeowners

  • Use equity money as you need it, without refinancing
  • Lower interest rates than credit cards or personal loans
  • Finance home renovations or investment properties

HELOC benefits for home buyers

  • Finance more expensive homes without a nonconforming loan
  • Make a larger down payment and avoid mortgage insurance

Types of HELOCs

There are generally two main types of HELOCs – a Piggyback HELOC and a Standalone HELOC. A Piggyback HELOC is taken out when you close on your original mortgage. One benefit of taking out a Piggyback HELOC is that it can help avoid mortgage insurance or nonconforming loans. However, you may not realize that you want or need a HELOC when you close on your original mortgage. In this case, you would want a Standalone HELOC. A Standalone HELOC can be a good option when you want to consolidate debt or renovate your home.

Piggyback HELOC

Standalone HELOC

  • Taken out when you close on your original mortgage
  • Good to avoid mortgage insurance or nonconforming loans
  • Can be taken out later than first mortgage
  • Good for consolidating debt or building an addition

The All In One Loan

Another HELOC-type loan is the All In One Loan™. The All In One Loan™ is our proprietary loan that can help you access your home’s equity whenever you need and help you fully own your home sooner.

How it works

  • Deposits are applied to your principal first
  • All deposits automatically lower your balance
  • Interest is calculated daily,
  • You can withdraw money from your HELOC whenever you want
  • Pay down your balance faster, own your home sooner

The All In One Loan™ is the only mortgage in America that automatically recomputes interest every night over 30 years, provides you access to your equity for 30 years, is linked with a personal checking account, and charges your interest last – 21 days into the following month – giving you more time to reduce your principal to lower interest costs.

There are countless benefits that a HELOC can offer both homeowners and home buyers. If you would like to learn more about our HELOC options, contact us today.