HELOC FAQ’s
The basics of a HELOC, Home Equity Line of Credit
A backup financial resource is a home-equity line of credit, or HELOC. A HELOC taps the home net equity as a source of capital. If your house has a $400,000 value and you owe $100,000, the net equity is $300,000. Typical HELOCs provide 80 percent of net equity, thus $240,000.
Most HELOCs fluctuate above the prevailing prime rate, currently at 8.25 percent. If your credit is favorable, you might obtain a rate below prime — and vice versa. In many cases, interest paid on a HELOC is tax deductible.
Some financial institutions offer fixed-rate HELOCs. Read the contract. The fixed rate might be a teaser for a short period and then increase. Having a proper emergency fund and backup plan is prudent financial planning.
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