HELOCs 101 | Home Equity Line of Credit Explained

We have talked at length about the various strategies one can utilize to make the most of a HELOC, especially when using them to accelerate the elimination of debt or to aid in the development of your real estate portfolio.

However, in today’s episode, we’re going to look at how a HELOC works and all one needs to know about this much beloved Debt Weapon.

We’ll start with what a HELOC is before we dive into how it works and what you should expect once you have one.

A Home Equity Line of Credit, or HELOC, is a loan that allows you to borrow against the equity in your home and have the equity unlocked in cash, with relatively low interest rates.

A HELOC is a revolving line of credit, operating similarly to a credit card, meaning that you can continually draw on it over time, whenever additional funds are needed, rather than receiving a loan in one lump sum.
HELOCs have a drawing period, which is defined as the amount of time that you are allowed to draw on the credit.

This drawing period varies between five and twenty years, with 10 years being the most typical.

This makes HELOCs an attractive way to access equity in a house, since they provide access to large amounts of money for long periods of time.

Your home equity is the difference between what you owe on your mortgage and what your home is worth.

So, for instance, if your house is worth $500,000 and you owe $300,000 on your mortgage, you have $200,000 in equity in your house, which you can then use to take out a line with a HELOC.

To qualify for a HELOC, lenders want to see you have at least 15-20% equity in your home along with a good credit score of 700 or higher as well as a lower total debt balance.

85% is the maximum borrow amount and HELOCs are secured against your home, meaning that if you are behind on payments or you are delinquent on the loan, your property could be repossessed.

Many homeowners use HELOCs to cover big life expenses, such as home repairs or updates, large furniture purchases, or paying regular expenses, like college tuition.

If you’re familiar with this channel then you’ll know that we deploy HELOCs a bit differently, from strategies like paying off a mortgage in as little as five years to using HELOCs to build a real estate investment portfolio.

How To Pay Off A Home FAST

How To Pay Off Your Mortgage in 5-7 Years

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Timestamps:
0:00 - Intro
0:30 - What is a HELOC?
2:52 - HELOC Draw Period
4:23 - Interest Only
5:07 - How To Find The Best HELOCs
6:57 - Using A HELOC
10:50 - Alternatives To HELOCs

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#heloc #homeequitylineofcredit #debtweapon

[jbeezy]

I got my HELOC from PENFED...first 6months is .99% took some $ out at close I didn't really need. Used it to pay some things off and have my auto pay set to pay it all back in 6 months before the regular interest kicks in😁

[jonburton]

I have a 1st position heloc..Its great..allows me to do velocity banking on autopilot..high recommend acquiring this type of debt weapon.

[VIPFinancialEd]

Timestamps:
0:00 - Intro
0:30 - What is a HELOC?
2:52 - HELOC Draw Period
4:23 - Interest Only
5:07 - How To Find The Best HELOCs
6:57 - Using A HELOC
10:50 - Alternatives To HELOCs

[SB-okdl]

Navy Fed has 20 year HELOCs I'm applying for one now I'll check out PenFed too

[El-Gentlemen]

Some YT videos say the amount you borrow is 80% your equity and others say 80% of your home value. Which one is it?

[Romenet]

If you take out a HELOC for debt consolidation as the “reason”, do they make you immediately pay all of those debts at once?

[priscilladawes]

I would like some complementary coaching pretty please 😊

[sammyalabamy]

Can someone have more than one HELOC from 2 different banks?

[RynAmelli]

Okay so check this b.s. out lol. Navy Fed who I’ve banked with since 2011. Have great credit all bureaus over 700 status. They made me go through the entire process & along the way during which I was only dealing with 1 single contact load officer. At the very last week while waiting to get the appraisal done & finally set up because I never had one. They screwed me over. I’m a disabled veteran here in state of Georgia. None of my accounts are behind nor, are any delinquent. They told me I could take up to 90% of equity initially on a V.A. backed loan. So during the process they told me “Oh your score is a 690. I refuted this immediately & told the new lady who jumped in my file at the tail end of the process, that wasn’t my score. They pulled only EQ & I know for sure my score at the time they pulled was 729 or 735. Which I can prove via documentation from my credit monitoring service. So, with all that being said & I need to delete the inquiry & a few others that are due to fall off soon. They came up with lots of excuses as to why I was denied after starting the process in late August up till mid-week last week. Pure B.S. then told me a week ago the lady who was working on my file was fired for being unprofessional. I am an African-Amer. & she was as well (ironic isn’t it). Was never unprofessional to me & told me the truth along the way of process. My home is owned by me free & clear as well no leans no debts linked. Nonetheless, I still need to do a Heloc on my home which is valued currently at abt $450 & $etcs… All my debts are decreasing as well. Please, contact me with some methods/options to fight past there discrimination behavior tactics it really pissed me off & was undeserving. Also, no appraisal was ever completed to repeat lol @VIP Financial Education Any valuable direct help on this would be greatly appreciated. Thanks man🫡💯

[patrickjoyner]

Plz don't use pfcu. The way they do calculations is in their favor .

[scrappychildhood]

Since the AVG Joe and jane can afford 200k home looking aT HOMES TO FLIP under `100k

[gregallen]

A company that helps people pay off their home using helocs tells me there are banks that will make a HELOC loan using a NEW home as collateral (not the home you’re in). They’re legit, around a long time. They want you to spend several dollars thousand dollars with them for their debt repayment program but all I need to know is who are these banks that will do this? Does anyone in this audience know?

[davidwelty]

I have a paid for house, I would never put my home at risk to borrow money.