Product

James Scelzo

2022-11-01

The HELOC as a Financial Tool

The Home Equity Line of Credit (HELOC) has seen a revival in 2022 for a few reasons. Many homeowners have probably noticed their home appreciated in value coming out of the pandemic. Today, these same homeowners are witnessing mortgage rates are also on the rise and therefore moving or refinancing may no longer be an option.

The HELOC provides homeowners access to cash, which presents options to move closer to their economic goals. If your customers need access to funds and they own a home with equity in it, you can now also provide them with HELOC opportunities through the Even marketplace.

HELOC Details

As its name suggests, HELOCs are a revolving line of credit borrowed against the equity in a home. While technically, it is a loan (because the borrower will repay the money drawn), it's not a typical loan because as the outstanding balance is repaid during the draw period, the line is replenished - like a credit card. Therefore, your customers can borrow from the line as needed during the draw period (usually 10 years) and within the approved credit limit. After this period, the HELOC enters a repayment-only mode which typically lasts 10-20 years.

Why Offer HELOCs as Products?

The short answer is that your home owning customers may benefit from a HELOC, but they may not understand how it can be used as a financial tool. The HELOC allows property owners access to their equity which may open up other financial resources. The capacity to extract equity from one's home while still living in it can be a tremendous advantage when there are other financial demands at play.

1. Home Improvement: Many HELOC borrowers use the funds for home improvement projects. Upgrading household resources, such as adding new square footage or installing new fixtures in kitchens and bathrooms, usually also increases the overall value of the home. Using a HELOC for this purpose may improve the value of the home.

2. Debt Consolidation: They can pay off high interest credit card debt. In most cases, interest rates on HELOCs are lower than on credit cards. HELOC borrowers can reduce the interest they pay each month for credit card usage when they pay off that debt using a HELOC.

3. Financial Growth: They can make real estate investments that may provide additional sources of revenue or simply buy a second home. For example, many people contemplate investing in real estate as a rental unit or a vacation property. They can start a business: Like launching an investment property project, opening a business requires upfront capital to build out a company.

4. A Safety Net: Not least significant, HELOC funds can also be used to cover emergency costs. Obviously, emergencies can arise at any time and in any situation. If the emergency fund is low, a HELOC can be a safety net as an alternative to personal savings or retirement assets. With a HELOC your customers only pay back what is withdrawn from the line.

Every home owning customer is a potential HELOC borrower. You can enhance your organization's relationship with its home owning customer base by helping them understand the value of the HELOC, and then providing it to them with the same level of integrity and quality they receive from you otherwise. Even Financial gives your organization the power to offer HELOCs to all your homeowning customers.

Interested in adding HELOCs to your business, or learning more about HELOC products in general? Reach out to us today.

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Disclaimer: The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the suitability of any Even Financial product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional. Any information or statistical data sourced by Even Financial through hyperlinks, from third-party websites, are provided for informational purposes only. While Even Financial finds these sources to be accurate, it does not endorse or guarantee any third-party content.

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