how do i know if a heloc is good for me?

Question

I DO WANT TO DO AN ADDITION TO MY HOME AND PAY OFF SOME CREDIT CARDS WHAT DO U THINK?

THANK U !! U ALL HAVE BEEN VERY HELPFUL TO ME!!

Answer 1

A HELOC is a Home Equity Line Of Credit. You pretty much have two choices here. A HELOC or a fixed-rate mortgage.

A HELOC is an open-ended or a revolving account, meaning it is similar to a credit card where your balance can increase as you draw more money from the account or the balance can decrease as you pay it off. A HELOC can be a great tool to borrow money against the equity in your home for an inexpensive interest rate without having to refinance. If you plan on making several smaller withdrawals, go for a HELOC.

The second option is a fixed-rate mortgage. The benefit here is your interest rate is fixed. The HELOC rate will go up and down often, so you never quite know what your payment will be. If you plan to only make one withdrawl, you definately want to go with a fixed-rate mortgage so that your rate is fixed and the payment never changes.

One last comment on a HELOC or a fixed-rate mortgage. A HELOC on your credit report will sometimes count as a revolving account like a credit card. If you have a maxed revolving account on your credit, it can make your credit scores go down very fast. If you are going to borrow more than 50% of your available funds in the HELOC, and you have credit issues already, you may want to consider a fixed-rate mortgage. On the other hand, if you were going to borrow less than 50% of the available funds in your HELOC, it could greatly increase your credit scores. Remember though that all credit reports are different and it depends on your current credit situation.

Answer 2

A HELOC is a great tool to have when doing improvements to your home, especially if you aren't really sure how much you'll spend, or how quickly you'll spend it.

That being said, right now, it's likely that getting a fixed rate home equity loan would give you a lower interest rate. If you can figure out as close as you can, exactly how much you'll need for your renovations and debt consolidation, this might be a better choice. You just want to make sure you borrow enough, but not too much, since even if you pay back an extra $3000 you borrowed but didn't need, your payments will remain based on your original loan amount. Which is ok too, since your loan will pay off faster if you put a chunk of money against it.

Any banker you deal with should be able to walk you through both options, including what rates you personally can qualify for, and help decide together which will best serve your specific needs.

Answer 3

Can you afford the payments that will be generated if you max. out the heloc?

Is your home on the market to sell? You can't get one if so.

What are you going to do with the money? Since you are taking out the equity in your home every time you write a check on your HELOC. Are you doing something wise with the funds? Adding on to your home? Fixing up your home? If you are just going to go out and blow the money on fun stuff such as luxury items, boats, trips, vehicles, RV's, jewelry, electronics etc. Those items are highly depreciating assets. To take money from your home to buy toys is a terrible idea, no matter how many others you see are doing it.
If your home needs a roof, go for it. But to just have one for the sake that others have one. Don't follow the croud on what to do with your money. Most people don't have any savings and aren't about to start. Be smart with your money.

Answer 4

So long as you can afford the additional payments it's fine..