What are the Benefits of a Home Equity Line of Credit?

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A home equity line of credit, or HELOC, enables homeowners to borrow against the current equity in their house. As a revolving line of credit, a HELOC lets homeowners borrow money as they need it, up to their limit, with flexible repayment terms.

The Benefits of a Home Equity Line of Credit

Borrowing flexibility

This is the biggest benefit of a HELOC over fixed rate loan products like personal loans or home equity loans. Similar to a credit card, with HELOCs, homeowners get credit limits against which they can borrow any amount at any time. HELOCs are a “revolving” type of credit, which means homeowners have the flexibility to borrow money from their line, pay it back, and repeat as needs arise.

Generally, a homeowner’s borrowing limit can be about 70-85% of the equity in their home, minus any other outstanding loans against it, such as a primary mortgage.

Spending flexibility

A homeowner can use the money from a home equity line of credit for any purpose, without having to justify the use to a lender. Common uses include home repairs and remodeling, college tuition and debt consolidation.

Low or no closing costs

Home equity lines of credit may have low closing costs or even none at all.

Low interest rates

Because they are secured by your home equity, HELOCs tend to have lower rates than unsecured loans like credit cards or personal loans. This means that rates are likely to fluctuate over time, but HELOCS are required by law to have a maximum increase in rate that can occur over the life of the loan.

Interest compounds only on amount used

If a homeowner takes out a fixed-rate loan, they pay interest on the entire lump sum they receive from the first day of the loan, whether or not they use it all right away. With a home equity line of credit, homeowners pay interest only on the amount they draw and only from the date the funds are withdrawn.

No cash withdrawal fees

Most lenders do not charge fees for drawing cash from a HELOC, unlike the high fees charged by credit card companies for cash advances.

Repayment options

Repayment options are flexible with a home equity line of credit. This type of loan may allow an initial period of interest-only payments, plus options to borrow for a short term and pay off at the homeowner’s convenience, to convert some of the adjustable-rate loan to a fixed rate for more stable repayment terms, or to refinance into a new HELOC.

Common Uses for a HELOC

Funds from a home equity line of credit can be used for any purpose, but most borrowers use them to pay for major expenses or debt consolidation.

A HELOC can be an excellent, low-cost source of funding for major home repairs or for renovations — updating, adding a room, a pool or a deck, new appliances, etc. They can also fund major non-home-related expenses such as weddings or college tuition.

A HELOC can also be a useful option for paying down high-interest debt because of the low interest rates offered by this secured loan. Paying down high-interest loans with a lower-interest loan can help homeowners save money and get out of debt sooner. It can also simplify their finances by consolidating multiple payments per month into just one.

Bethpage Federal Credit Union Home Equity Line of Credit

A Bethpage HELOC allows members to borrow against the equity in their homes with a flexible revolving credit line, while still having the stability that comes with the fixed interest rate of a traditional home equity loan.

A Bethpage HELOC provides members with:

  • No application or appraisal fees.
  • The flexibility to use their available line of credit as needed during a 10-year draw period.
  • The opportunity to lock in the rate, at any time during the draw period, for any or all of their balance, in up to three fixed-rate loan options. The fixed rate won’t change during the selected term, providing protection from the possibility of rising interest rates.1
  • The option to maintain all or some of their balance at a variable rate and make interest-only payments during the 10-year draw period.

We make it simple to apply for a Bethpage HELOC. Why not explore this flexible, low-cost loan option today?

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[1] A Fixed-Rate Loan Option allows you to convert outstanding balances to a fixed rate. Fixed-rate conversion is optional. Minimum amount is $10,000. Borrowers may have three (3) fixed-rate conversions open at one time.