3 Burning Questions: HELOCs
If you’ve owned your home for a while or have seen it increase in value, you may be thinking about making a few upgrades. If so, you’ve probably considered a home equity line of credit (HELOC) to help cover the costs. A HELOC is a form of revolving credit. Think of it like a credit card—you get an account with a maximum amount of money and, over a span of time called the “draw period,” you can use the money as needed. At some point, you’ll need to begin paying that money back, plus interest.
HELOCs aren’t exclusively for home improvements. The money can be used for just about anything—your child’s tuition, medical bills or even a new car. You just want to make sure that you have room in your budget for the monthly payments once the repayment period begins.
We know HELOCs have a lot of moving parts. That’s why we asked our loan professionals to give us some of their most frequently asked questions. The answers may help guide you forward, making your old home your new dream home.
Question #1: Do HELOCs offer a fixed interest rate?
No. The rate is variable. This means the interest rate can fluctuate as the prime rate goes up or down. The draw period is the first 10 years of your loan when you can take money out of your HELOC. During this time, your minimum payments are interest only, so they may vary. Once you move into the 10-year repayment period, your monthly payments will include interest and principal.
Question #2: Are there any fees associated with closing a HELOC?
Yes. HELOCs have a recording fee when the loan is closed and can sometimes incur fees. At Mountain America there is a recording fee of $74 ($60 if the loan was opened before August 1, 2020). There’s also an early termination fee of $220.00 if the HELOC is closed within two years of origination ($170 if the loan was opened before August 1, 2020).
Question #3: I have a HELOC through Mountain America. Can I change my due date?
No. The due date that is assigned when you first get your HELOC will be the same due date all the way through the draw period and the repayment period.
We hope this information clarifies a few things for you regarding HELOCs. If you have more questions or are ready to apply for your HELOC, feel free to contact a Mountain America representative online, by phone or in a branch.
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