Depending on your situation, taking out a HELOC may be a better option when you have bad credit than some other loans or credit products would be.
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“Average homeowner gained $16,000 in home equity in 1 year.” That’s not a clickbait headline, it’s from Housing Wire, a publication of note for the mortgage industry.
If you’ve read many of these columns, you know that I’m a veteran of the real estate crash. Or, maybe I contributed to it… it all kind of depends on your point of view, I guess. Anyway, as I read further into this article, I learned that negative equity (also known as being “underwater”) fell another 9%, leaving only 4.3% of mortgaged homes underwater nationally.
Obviously, this is incredible news for people who own houses already, not such great news for people looking to buy a house right now…
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A home equity line of credit, or HELOC, is a revolving line of credit that’s secured by the equity in your home. Think of it as a secured credit card, with your home acting as collateral.
Just like with a credit card, you’ll have a limit. This limit represents the equity in your home. You can tap it as frequently as you want, provided you have the available balance. When you pay down your balance, that amount of money is credited to your HELOC and you can spend it again later.
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In part three of our “Different Types of Mortgages” series, we talked about conforming loans, jumbo loans, and super jumbo loans. Now, we’ll share some of the other types of mortgages that aren’t used for buying a residence -- from refinancing loans to home equity products.
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