Every homeowner trusts that their home will appreciate in value over time. With historically increased home equity value in the last two years, especially, this prediction has rung true. Because of this, 47.7% of U.S. homeowners can access a home equity line of credit.
These homeowners are now determined to be equity-rich, as reported by Atton, a real estate data company. A HELOC allows borrowers to tap into their home equity as revolving credit.
Every household is unique in what personal finance priorities define their family needs. However, the home equity line of credit gives them several opportunities to meet their financial goals. Read on to learn more about the flexibility and benefits of a HELOC.
HELOC: How Does It Work?
A HELOC is a secure debt with more attractive and flexible options than credit cards or personal loans. A homeowner can borrow up to 80% of their home equity. If a homeowner’s residence has a market value of $450,000, 80% of $450,000 is $360,000.
The homeowner can withdraw their equity up to a certain amount. Then, the asset’s balance reduces from the remaining amount. The monthly statement may indicate that the remaining mortgage balance is $250,000. This means a maximum of $110,000 over a 10-year period is accessible.
The first ten years of a HELOC is the draw period. Fixed rates are available during this period, so worrying about a variable rate is unnecessary. The HELOC withdrawal methods are very flexible for Amerant Bank customers.
The borrower may pay interest only for the first ten years. Although the interest HELOC draw period can be for the following duration:
- One year
- Three years
- Five years
- Seven years
- Ten years
When it’s time to end interest-only payments, principal and interest payments will begin. Amerant Bank allows customers to pay off their home equity line of credit early during the repayment period.
After closing, Amerant Bank can provide its customers with a checkbook for any purchase they have in mind. In addition, customers have the option to pay their monthly bill online for convenience.
5 Best Ways to Use a HELOC
The best way for many households to use a HELOC is as a financial safety net. A HELOC calculator can help Amerant Bank customers understand how much they may qualify for. Then, let the financial planning begin.
We can discuss a lot of major benefits of a HELOC, but here are the five best ways to use a HELOC:
1. Emergency Funds
Some borrowers may place a portion of their home equity line of credit funds in an Amerant Bank savings account for a rainy-day fund. A HELOC revolving credit option enables you to attend to unexpected issues in life. These can include broken pipes or sudden vehicle maintenance immediately when emergencies arise.
2. Home Renovations
Many homeowners are surprised to know there are more incentives for home renovations than expected. A HELOC can provide tax benefits when used for home renovations or home improvements. These can be overdue upgrades or necessary home repairs.
3. Start a Business
Starting a business with a home equity line of credit is smart. A HELOC can fund all sorts of equipment or a commercial office lease. A lower interest rate and easy access to funding mean one less thing to worry about in running a new business.
4. College Expenses
Scholarships do not always cover tuition, books, or housing expenses. Taking out a HELOC allows the homeowner to return to school or with student loans. Additionally, they can help their loved ones tackle a new educational journey.
5. Consolidate High-Interest Debt
Consolidated high-interest debt can be credit cards, personal loans, or automobile payments. Having one monthly payment with a lower fixed rate helps ease financial stress.
Amerant HELOC Flexible Options
The benefits of a HELOC are not just what a homeowner can spend their funds on. They are also the various draw terms, fixed interest rates, and easy access to the home equity line of credit.
The Amerant HELOC flexible options for current and new customers can help them achieve financial goals. It can also help complete home projects and access cash for emergencies. Learn more at amerantbank.com, and follow Amerant on Facebook, Twitter, Instagram, and LinkedIn @AmerantBank for financial tips and upcoming news.
