Why I Like Home Equity Lines of Credit!

First of all, it is important to understand what a Home Equity Line of Credit or HELOC Loan is and knowing how to use it wisely. A HELOC is variable loan using the equity of your property for debt consolidation, emergency funds, or pleasure. The actual rate can vary each month based on the index used. But if used properly, the effective rate over the life of the Home Equity Line of Credit will almost always be lower than a conforming rate. Most HELOC loans are based on the Prime Rate plus or minus a percentage or fraction of a percentage point. The rate is usually interest only during the first ten to fifteen years depending on the lender terms. The best way to describe a HELOC loan is that they are generally very much like a credit card. You will have a credit limit based on how you qualify and then an interest rate based on the Prime Index. You can draw the total amount, or leave it as a line to draw on for emergencies.

I have always recommended my clients to obtain the largest line of credit possible. Why? If they lose their job or have an unexpected emergency, they can draw the funds to the limit without having to apply for a loan or refinance their existing loan. The funds are available and ready to use whenever needed. The nice thing about a Home Equity Line of Credit is that during the draw period, you are only required to pay the interest accrued each month. Another popular reason for using a Home Equity Line of Credit is that the yearly interest is usually deductible under federal and most state income tax laws. If using the line of credit for debt consolidation or paying off your credit cards, this makes the cost of borrowing money very attractive. Also, a Home Equity Line of Credit has a much lower interest rate than most credit cards.

Tips For Using a Home Equity Line of Credit

1) If possible, get a checking or saving account with the same bank or lender who has your HELOC loan.

2) Transfer or deposit all incomes into the Home Equity Line of Credit each month when received. If you have a checking or savings account with the same lender as your Home Equity Line of Credit, you can transfer income in and out of the HELOC account from your checking account. By transferring your income into the line of credit, you are in affect, making a monthly payment. This reduces the actually interest you will pay each month and the more deposits you make, the more positive the affect.

3) Consolidate as much of your debt as possible into your Home Equity Line of Credit. If you have more debt than the line of credit limit, pay off your credit card debts first with your Home Equity Line of Credit. You already owe the money to someone, why not get more control of it and consolidate as much as possible? You will also receive tax benefits that aren’t available with credit card debts.

4) Pay as many of your bills on a credit card and then pay your credit card off each month through the line of credit. Also, pay all of your other monthly expenses from your line of credit. Your income has already been deposited into the Home Equity Line of Credit to pay those bills.

5) Budget your expenses. If using a Home Equity Line of Credit for your income flowing into, and your expenses flowing out of your HELOC, you will see your debt drop very quickly. There will be a great snow balling affect with your total debt. By consolidating all your debts into the Home Equity Line of Credit, you will basically have only one or two bills to pay each month. It also makes you more aware of what you are spending your money on each month.

There are some very expensive programs in the market to teach you these very simple steps. I have used them myself and spent thousands of dollars to see how they work. Sometimes it is good to use some outside help to get started, but it is not necessary to spend $3500 for a program that teaches you the five steps above. The best program I have found to help those who need assistance only costs $149.00. It will help you create family and personal wealth and is well worth the money spent. Need more information, call 801 277-6547 or email: American.mortgage@comcast.net.
Tag words: Home Equity Line of Credit, HELOC, Prime Rate, Prime Index, Debt Consolidation, credit card debt, income, expenses, budget, family and personal wealth, saving account, checking account, lender, pay bills, tips, interest rates, refinancing, snow balling affect