TRANSCRIPT:

Hi everyone. It’s Jamie, and I’m here with the real 411, answering all of your mortgage questions. Today we are going to talk about HELOCs. What is a HELOC? HELOC stands for a Home Equity Line of Credit. And it is a line of credit that is secured against your home. He locks function very much like credit cards. Just imagine having a very large credit card that is attached to your property.

Things you should know about equity lines; are that they are almost always adjustable based on a fixed margin, which never changes but added to the prime rate. The prime rate does fluctuate with the market. The thing about Heloc is that they have a lifetime cap, which means that your interest rate can only ever go up to a certain point, and then it caps out. But unlike other adjustable-rate mortgages, equity lines usually don’t have a limit as to how often or how much the rate can increase at any one time.

So in the event that the market worsened significantly, it is possible that your equity line rate could shoot all the way up to your lifetime cap without any warning. The other thing you should know about equity lines is that they’re actually fantastic for folks who don’t need to use the entire balance all at once. So if you’re looking to grab some equity in your home, maybe to do some home improvements or investments, and you don’t need all of the cash now, an equity line might be a great option for you. You only pay on the amount of the line that you’ve used. So for example, if you have a hundred thousand dollar (100,000) line of credit, but you’ve only used $25,000 of that, you’re only paying interest on that $25,000 balance.

I hope this helps to answer your questions about equity lines. Thanks for watching, and have a great day.

 

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