HELOC Home Equity Lines of Credit MRA Home Loans (877) 562-6606
When prime mortgage rates climb, such as the 30 year fixed rate, there are alternative options available that can help keep your payments lower and your purchasing power higher.
A HELOC or Home Equity Line of Credit may be a good option for you. In this blog we will dive into HELOC Mortgage Loans as well as the ups and downs of these types of loans.
HELOC's are almost like a credit card, in that it allows you to borrow funds up to a certain limit, and you only pay interest on the drawn amount, not on the credit limit. Unlike credit cards which are unsecured, with a HELOC the debt is collateralized against your home.
There Are Even More Ways To Use HELOC Loan To Your Advantage.
Let’s say you are living in Los Angeles and need a loan amount of $700,000. The maximum loan amount for a conforming loan in Los Angeles County is $647,200 and any loan amount above that would be considered a conforming high balance loan and therefore will increase your rate. By taking out a second HELOC loan for the amount that exceeds the $647,200 you are able to qualify for a conventional first mortgage and therefore obtain a better rate.
Another Scenario Where A HELOC Could Be Useful Is When You Are Trying To Eliminate Private Mortgage Insurance (PMI).
Private Mortgage Insurance is an insurance policy required by the lender to protect them when the down payment is lower than 20%. Let’s assume you only have the funds for a 15% down payment but you don’t want to have PMI, you can avoid the PMI by taking two loans. The first mortgage for 80% and a second HELOC for the remaining 5%.
► Tap In To Your Home's Equity For Home Improvements.
Another benefit of a Home Improvement Line Of Credit is to fund improvements to your home that will increase the value of your home. Funds can also be used should you have an unexpected financial emergency.
► A Source Of Money At A Lower Interest Rate Than A Credit Card Or A Personal High Interest Loan.
Another benefit of a Home Improvement Line Of Credit is to fund improvements to your home that will increase the value of your home. Funds can also be used should you have an unexpected financial emergency.
► What Does And Does Not Make Sense When Using Your Funds.
It does not make financial sense in utilizing a HELOC to buy a car, fund a vacation, buy stocks, buy cryptocurrency, buy investment properties, pay for college or to pay off credit card debt. You could lose your home to foreclosure if you fail to make payments on a HELOC Loan.
► Renovations & Home Improvements | Interest Can Be Tax Deductable.
The interest on a HELOC is tax deductible up to $750,000 when the money is used for renovations to your home or in conjunction with a purchase of a home. In order to qualify for a HELOC you must qualify with your income with satisfactory debt ratios. In general, the interest rate on a HELOC is tied to the prime rate and is an adjustable rate loan.
► Interest Is Based On The Current Prime Rate And A Margin Calculated Monthly.
As of June 2022, the prime rate is 4.00%. The way a HELOC works is that you have an index which is usually the prime rate and a margin that is determined by the lender at the time of approval. Those two elements are added together to determine the rate. The effective interest rate is recalculated on a monthly basis. The margin once determined never changes but the Prime rate (Index) is constantly changing.
San Fernando Valley
(818) 736-5858
21133 Victory Blvd, Suite 214A, Woodland Hills, CA 91303
California License
NMLS 234892 • DRE 01364816
MRA HOME LOANSAdjustable, Commercial
Conventional, Fixed, FHA, Jumbo
Stated Income & SBA Loans
HELOC Home Equity Lines of Credit | MRA Home Loans
With the current mortgage climate with the 30 year fixed rates climbing, there are alternative options available that can help keep your payments lower and your purchasing power higher.
A HELOC or Home Equity Line of Credit may be a good option for you. In this blog we will dive into HELOC Mortgage Loans as well as the ups and downs of these types of loans.
HELOC's are almost like a credit card, in that it allows you to borrow funds up to a certain limit, and you only pay interest on the drawn amount, not on the credit limit. Unlike credit cards which are unsecured, with a HELOC the debt is collateralized against your home.
There Are Even More Ways To Use HELOC Loan To Your Advantage.
Let’s say you are living in Los Angeles and need a loan amount of $700,000. The maximum loan amount for a conforming loan in Los Angeles County is $647,200 and any loan amount above that would be considered a conforming high balance loan and therefore will increase your rate. By taking out a second HELOC loan for the amount that exceeds the $647,200 you are able to qualify for a conventional first mortgage and therefore obtain a better rate.
Another Scenario Where A HELOC Could Be Useful Is When You Are Trying To Eliminate Private Mortgage Insurance (PMI).
Private Mortgage Insurance is an insurance policy required by the lender to protect them when the down payment is lower than 20%. Let’s assume you only have the funds for a 15% down payment but you don’t want to have PMI, you can avoid the PMI by taking two loans. The first mortgage for 80% and a second HELOC for the remaining 5%.Another benefit of a HELOC is to fund improvements to your home that will increase the value of your home. HELOC funds can also be used should you have an unexpected financial emergency.
The HELOC can be a source of money at a lower interest rate than a credit card or a personal high interest loan. Additional benefits include the fact that you are only charged interest on the money you access and as you repay the HELOC, the credit available will increase. For example, if you were hiring a contractor for renovations to your home, you can access the funds as you need them to complete the project.
It does not make financial sense in utilizing a HELOC to buy a car, fund a vacation, buy stocks, buy cryptocurrency, buy investment properties, pay for college or to pay off credit card debt.
You could lose your home to foreclosure if you fail to make payments on a HELOC.
The interest on a HELOC is tax deductible up to $750,000 when the money is used for renovations to your home or in conjunction with a purchase of a home. In order to qualify for a HELOC you must qualify with your income with satisfactory debt ratios. In general, the interest rate on a HELOC is tied to the prime rate and is an adjustable rate loan.
As of June 2022, the prime rate is 4.00%. The way a HELOC works is that you have an index which is usually the prime rate and a margin that is determined by the lender at the time of approval. Those two elements are added together to determine the rate. The effective interest rate is recalculated on a monthly basis. The margin once determined never changes but the Prime rate (Index) is constantly changing.
Feel free to contact us to look at your individual situation, assess which options are best for you and/or clarify any of the above.
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NMLS 234892 • DRE 01364816
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San Fernando Valley
(818) 736-5858
21133 Victory Blvd, Suite 214A, Woodland Hills, CA 91303
California License
NMLS 234892 • DRE 01364816
EVERY STEP OF THE WAYWe're There And We're On It
Pre-Approval In Record Time
Exceeding Your Expectations
MRA HOME LOANSAdjustable, Commercial
Conventional, Fixed, FHA, Jumbo
Stated Income & SBA Loans