Homeowners should always be on the lookout for ways to utilize the full value of their home. Thankfully, Achieva is helping homeowners unlock new possibilities with great rates and offers on HELOCs (home equity lines of credit) and HELOANs (home equity loans).
Over the years, we’ve written a ton of information about both HELOCs and HELOANs, with the goal of helping our members and future members achieve their financial goals. As more people look to expand their financial literacy, lighten financial burdens, consolidate debt, build emergency funds, and enter different phases of the homeownership journey, we thought we’d dig through our archives and revisit our must-read information and tips on leveraging the equity in your home.
Let’s get started.
What is the difference between a HELOC and a Home Equity Loan (HELOAN)?
A home equity loan is – as stated – a loan, and comes with a fixed payment and fixed interest rate for the entirety of the loan term. It keeps your first mortgage in place and allows for possible tax deductions.
A HELOC is a revolving credit line with adjustable interest rates. You can get up to 90% loan-to-value as a qualified borrower with competitive rates and no annual transaction fees.
To make it simple, a HELOAN is the equivalent of receiving a lump sum of money that will be paid back. A HELOC works more like a credit card, but with more agreeable interest rates for large-scale purchases and projects.
If you’re interested, apply online or call one of our financial advisors at Achieva Credit Union to see whether a loan or a line of credit is best for what you’re planning!
Ask about our Limited-Time Offer of up to $1000 off qualifying closing costs on HELOCs and HELOANs.
Easy Ways to Build Home Equity Quickly
Your home is already a great investment, but to get even more out of that investment, you’ll want to build your home’s equity. As your equity grows, so will your collateral and safety net. With more equity, you’ll be able to get a better line of credit to meet your needs. Here are our past recommendations on a few steps you can take to grow your home’s equity quickly and with minimal investment:
- Pay more than the mortgage minimum
- Put bonuses and gifts toward your mortgage
- Make home improvements, like building a deck on your property, to increase the property value.
To calculate your current home equity, start by subtracting the amount you owe on all loans secured by your house from its appraised value.
Home Equity Loans (HELOAN) vs Mortgage Refinancing
If you’re looking to consolidate your debt, a home equity loan could be a better option than completely refinancing your mortgage with the same, or another, lender.
You tend to consolidate debt when you can decrease the interest rate and speed up its elimination. While refinancing is certainly an option, a HELOAN with a lower interest rate and simpler payments can put you on the right track for debt-free living.
A Home Equity Line of Credit (HELOC) Can Be Tax-Deductible
One of the particularly nice advantages of a HELOC is that it can be tax-deductible. If you use the money to buy, build, or substantially improve your home, the interest paid on your HELOC can be tax deductible. You can remodel the kitchen, the bathroom, update the landscaping, and more to improve the resale value. So, not only will you reap the benefits of your home improvement projects on an everyday basis, but you could also see an improvement on your tax bill.
Speak to an Achieva financial consultant or tax advisor for specific information about tax deductions and charges.
Be Aware of the HELOC Draw Period
If you take out a HELOC, you’ll want to make sure that you know the ins and outs of the draw period. A HELOC draw period is the phase where you can withdraw funds up to your credit limit, though you do not have to use the full allotted amount. During this time, you usually only have to pay interest on the amount you borrowed. Repayment periods for a HELOC can vary based on your agreement, but typically last anywhere from 10 to 20 years.
If you’re looking at either option to leverage the value of your home in the near or far future, speak with an Achieva professional today. We’re here to help you at every step of your journey and set you up for long-term success!
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