Are you a homeowner who is currently interested in securing an extra source of income? There are some loan options available that can help a borrower access their home equity in exchange for credit or cash. One great option that lets you tap into your home equity is a home equity line of credit, or HELOC. If you are located near Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, and interested in learning more about accessing your home equity to help boost your income, Foundation Mortgage can help. Continue reading to learn more about utilizing a home equity line of credit.

HELOC: Essential Information

The total amount that your home is worth minus the amount that you still owe on your home is known as your home equity. A home equity line of credit is categorized as a second mortgage that allows a current homeowner to borrow money from the equity that has built up in their home, and use that funding as a line of credit that is required to be paid back. Each time you make a monthly mortgage payment, the amount of your home that you own grows. After you have built up a sufficient amount of home equity, you have the opportunity to use that equity as an investment and an income source. Eligibility requirements for a home equity line of credit vary for each borrower’s situation, however, typical qualifications include a debt-to-income ratio, (DTI), of 43 percent, a 620 or higher credit score, and most lenders require at least an amount of 15 to 20 percent of home equity built up.

How A HELOC Works

Similar to a credit card, a home equity line of credit lets you borrow money against your home equity for a specified amount of time with a specific a credit limit, and your home is used as collateral for that credit line. Generally, if you have higher credit, you will be able to get a lower interest rate on a HELOC. As you pay back the HELOC, your credit availability will become restored, and you will be able to borrow as much as you need throughout the duration of the specified time period. There are two separate periods in a HELOC; repayment of the loan and borrowing. In the repayment period, a borrower is no longer able to acquire money and the period of repayment is initiated. During the draw period, the line of credit is open to the borrower and available for use. Borrowers typically use a home equity line of credit to help consolidate debt, make home repairs or renovations, etc.

If you are a homeowner interested in ways to increase your income with a HELOC in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, contact Foundation Mortgage today for a consultation.