Find Best HELOC Rates


1 What can I use a HELOC for?

A HELOC can be used for nearly anything that you would typically use a credit card for. Essentially, it is a revolving credit line that uses your home’s equity as collateral.

However, common reasons to use a HELOC include debt consolidation, home repairs, major medical bills, education and other major expenses. Day-to-day expenses are not usually paid for through a HELOC.

Depending on the lender, you may be able to access your home equity credit line through checks, online banking, telephone banking and/or a card linked to the HELOC.

2 When do HELOC rates change?

Most HELOC rates vary in the same way that credit card APRs vary. HELOC rates are usually determined by the prime rate, plus a fixed rate that changes depending on your creditworthiness.

The prime rate is a benchmark rate used by the financial industry and it fluctuates based on the federal fund rate, which is set by the Federal Reserve. When interest rates are on the rise, you can also expect rates on all credit lines, including HELOCs, to rise as well.

3 Are there tax advantages to having a HELOC?

A major benefit of a HELOC is the ability deduct interest paid on borrowed funds, much like a mortgage. However, there are limits to how much interest you can deduct during tax time, depending on how you used your HELOC funds.

Interest is tax deductible on up to $1 million if funds are used to purchase or improve your home. For non-home-related expenses, interest is deductible on up to $100,000. Additionally, you cannot deduct more than the home’s fair market value.

The tax advantages of using a HELOC may seem attractive, to the point where it would seem unwise to not use it for all expenses. However, remember that a HELOC is secured by your home -- failure to repay your HELOC may put you in danger of losing your home.

4 Are there tax advantages to having a HELOC?

Deciding to agree to a HELOC is a major financial decision. And you should weigh your options carefully first. There are benefits to HELOC over other financing options, which you should consider including: current low prime rates vs. other loan types, possible tax deductions for HELOC repayments, and access to major financial demands (i.e. home improvements, university fees, weddings, etc.)

Comments & Questions

Ask a Question

Thursday, 28 Sep 2017 4:59 AM
<p>Terry, Paul is incorrect. I work for one of the largest banks. Social security is considered income and is used for qualification purposes. The only thing to consider is if your ssi payments will be enough to cover your monthly debts. Do you have a retirement account you have been withdrawing from ?</p>
Tuesday, 18 Jul 2017 12:11 PM
<p>I have two homes- primary home is valued at 700K with 289K mortgage left. The other home is valued at $140K with 120K left in mortgage and is used as rental income but has unfovarable 6% adjustable rate mortgage with 70% going to interest, so it accumulates a lot of interest payment. I have been able to deduct them from tax return, which has helped a lot. I am considering Using home equity loan to just payoff the mortgage on the rental property rather than buying another rental- not happy with the loan I have. I am also thinking to refinance- either way, I am going to have to bring some money tot he table since there is not much equity and price of the house has not gone up much. Also my job situation is bit unpredictable, so getting home equity would be better as opposed to HELOC so the bank can't pull the limit away from me in case I lose the job. So question to the group- is home equity loan is rightly suited compared to HELOC? Should I buy off the mortgage on the rental or refinance? Should I not worried about the rental and look for another property? If I don't want to put all my money in real estate, should I just get HELOC to cover me for unexpected events and hope bank does not take the line of credit away?</p>
Tuesday, 16 May 2017 10:19 PM
<p>Generally, a home equity loan would be the preferred option for this purpose, especially if you want to lock in rates during a time when interest rates are likely to increase. HELOC is usually the way to go if you need to borrow small amounts on a regular basis.</p>
Tuesday, 16 May 2017 9:20 AM
<p>MY home is valued at $700k. I have a remaining balance of $280K on the mortgage. I want to pull $200K out for another property. Should I use a home equity loan or HELOC? Any other advice?</p>
Thursday, 20 Apr 2017 11:58 PM
<p>If your home is valued at 180k the most a bank would loan on a HELOC is ~$44,000 which is 80% of the value minus what you currently owe.</p>
Saturday, 11 Feb 2017 4:01 PM
<p>I have 2 sons in college and it looks like we will need to finance about $50,000 to $60,000 of their education. Our home is valued about $180,000 to $200,000. We owe about $100,000. What would be the maximum a bank would be willing to loan? We have excellent credit. Would it be more beneficial to take Government Educational loans for this? Or Heloc? </p>
Wednesday, 01 Feb 2017 1:07 AM
<p>A major component that is required in order to be approved for a loan is the CAPACITY in which to repay the loan. That being said, you need to have sufficient income. However, many lenders do not consider Social Security as a traditional form of income. <br>It is recommended to pre-retirees to obtain a HELOC p r I o r to retiring while you still have earned income to increase the likelihood of approval.</p>
Friday, 06 Jan 2017 12:15 AM
<p>My house is paid off, value is $700,000.00 and I want to add another master suite. I don't know what to do, get a HELOC or a line of credit. I am retired and live off of social security. My credit score is excellent. Can you help me decide? Or do I just pay the new construction costs from my savings</p>
Thursday, 29 Sep 2016 8:30 PM
<p>You will be able to withdraw to 80% of equity, which in this case is about 30%. (100K Value : 50K-loan 50K-Equity:::: 100Kx80%= 80. 80-50(loan) = 30%). Process gets much complicated with legal process. You may be able to get approval, but must go though bank's legal underwriting and takes much longer time for approval.</p>
Thursday, 29 Sep 2016 8:22 PM
<p>You need to satisfy three categories for heloc approval. DTI (debt to income ratio), LTV (Loan to Value ratio) and credit score. Your LTV and credit score are satisfied, but income (most banks approve DTI below 43%-50%) is need for you to at least apply for Heloc. Most banks will require 2yr W-2 and most recent paystub.</p>
Tuesday, 20 Sep 2016 2:16 AM
<p>I own 50% of an investment property. The other 50% will begin a probate process shortly. I would like to obtain a HELOC for 50% of the equity(which would be my 50% anyway). Can I still get a HELOC eventhough the estate of the other 50% is about to start probate?</p>
Wednesday, 14 Sep 2016 2:49 PM
<p>Can I get a heloc if I do not have a job, however my home is paid off and credit score is 821</p>
Wednesday, 01 Jul 2015 8:25 PM
<p>You should be able to use either as collateral for your HELOC. However, with a credit score of 650, you may have trouble qualifying for a HELOC. If you do, you may not get the lowest interest rate. I suggest that you take some time to boost your credit score before applying.</p>
Wednesday, 01 Jul 2015 5:22 PM
<p>I have 2 homes paid off. credit score of about 650.00 .can I use either home to apply for the heloc??</p>