“What’s a HELOC?” We hear that often and it’s simple, but sounds complicated. A home equity line of credit, HELOC for short, is a loan that uses your home as collateral. Lenders allow you to borrow up to a certain amount based on your home's value and how much equity you have in it. Equity, by definition, is the value of a mortgaged property (your home) after deduction of charges against it (what you still owe on your home).

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When you receive a HELOC from True Sky Credit Union, it comes in the form of a credit card. You’re even able to you use it as such. The limit set on that credit card is based on your home equity, your credit score and monthly income to determine that amount that you’re ultimately able to pay back.  HELOCs are often used for items like home repair or down payments for larger purchases. But they can be used for almost anything such as vacations, vacation homes, weddings, medical expenses, even debt consolidation. HELOCs are a great way to take advantage of lower interest rates compared to other forms of borrowing and types of loans.

Advantages

  • Money borrowed against your home equity

  • Draw period - where payment is interest only

  • Typically lower interest rate

  • Can use the money on anything

With any type  of loan or credit, there are risks. With a HELOC, if you’re conscious of what you will be spending your line of credit on, you will be just fine. If you’re using your HELOC to pay off credit cards, there is a chance you can continue to charge purchases on your credit card. Debt can occur again while still having to pay back your HELOC on top on the other credit card debt. The great thing about HELOCs, there is a “draw period” that varies by lender, typically the first 5 or 10 years, where the minimum monthly payments are interest only. After the draw period ends, repayment period begins with principal and interest to pay off the entire loan on a set date. If one is wise about their repayment schedule and the money that they’re using their line of credit, HELOCs can be a cost effective way to borrow money.

Have a major home repair? Just want to update your kitchen? Just need some extra cash on hand? To discuss your HELOC options, come by any branch to speak to one of our Real Estate Loan Officers.