Is a Home Equity Line of Credit Right for Me?
There are several loans designed specifically for homeowners, but a home equity line of credit (HELOC) may be one of the easiest to secure. At Renasant, we're here to help you determine if a HELOC is right for you.
What is a HELOC loan?
A home equity line of credit (HELOC) is a home equity loan that lets you withdraw money as you need it, then repay the funds with interest— similar to a credit card.
The line of credit is secured by the equity you have in your home (the difference between your home's value and your mortgage balance). The more your home is worth, typically the larger the line of credit.
When you withdraw money from your HELOC, you'll receive monthly bills that include a minimum payment based on the interest. Payments may change based on your balance and fluctuations of the interest rate.
Renasant Bank also offers a convertible HELOC option which allows you to lock a fixed rate on a portion of your loan instead of the variable rate, providing fixed monthly payments for your line of credit. This can be useful in reducing concerns about potential rising interest rates. Minimum amounts are required, and the initial rate may change based on market conditions.
Most home equity credit lines have two stages: a draw period and a repayment period. During the draw period, you can access your available credit whenever you choose. Often a HELOC will only require small, interest-only payments during the draw period, though you may have the option to pay extra and have it applied directly toward the principal. You will make regular payments on the principal and interest until the balance is repaid. Like other banks, Renasant's HELOC may require a balloon payment at the end of the draw period, depending on any principal payments you made. You would also have the opportunity to refinance the balance into a new home equity or term loan.
What are the advantages of a HELOC?
One of the primary HELOC advantages is the flexibility. Once your credit limit is approved, you can use your HELOC as little or as often as you need to. Other advantages include:
- Interest-only payments during the initial borrowing period, making this an attractive option for those wary of high monthly payments. Remember that making interest-only payments may mean you have a balloon payment at the end of the loan.
- Long repayment periods ensure you have all the time needed to repay your loan.
- Convenience: you can take what you need when you need it without waiting for approval or applying for a new loan.
- Flexibility to use the funds on a variety of projects, wants, and needs.
- Peace of mind that you have a line of credit readily available for unexpected emergencies and expenses.
What are common uses of a HELOC?
Here are some common situations where taking out a home equity loan could be the right choice for you. Before applying for HELOC, carefully weigh all your options and consider discussing your plans with a financial advisor or credit counselor.
- Home Renovations: Many homeowners use a HELOC to fund home improvements or repairs, such as kitchen remodels, bathroom upgrades, or roof replacements.
- Debt Consolidation: A HELOC can be used to consolidate high-interest debt, like credit card balances, into a single payment with a lower interest rate.
- Emergency Expenses: HELOCs can provide a financial safety net for unexpected expenses, such as medical bills or urgent home repairs.
- Education Costs: Some homeowners use a HELOC to help pay for tuition or other education-related expenses.
- Major Purchases: HELOCs can find significant purchases like a new car, vacation, or wedding, often at a lower interest rate than other financing options.
- Down Payment on Another Property: Some people use a HELOC to help with the down payment on a second home or investment property.
How do I get started?
At Renasant, we understand lending. Our team will work to tailor a HELOC that fits your goals.
Find a branch near you, and start leveraging the value you've put into your home, or call to set up an appointment at 877.367.5371.
Use this calculator to determine the home equity line of credit amount you may qualify to receive.