If you’ve built up equity in your home, you may have a borrowing option available to you. A home equity line of credit, or HELOC, offers unique benefits to homeowners looking to borrow money with lower interest rates than many other forms of credit.
Is a HELOC right for you and your family? Here’s what you need to know.
What is a HELOC?
You may be familiar with a home equity loan, in which you borrow a one-time fixed amount from your home’s equity. A HELOC, however, is a revolving credit line that is secured by your equity in your home. You can borrow against and pay back your line of credit multiple times during the draw period, similar to how you would borrow and pay back money on a personal line of credit or credit card.
Homeowners who open a home equity line of credit can use their account for a variety of reasons, including:
- To cover expenses during an emergency
- To pay for home repairs or renovations
- To pay property taxes
- To fund a major expense
The benefits of a HELOC
One big advantage of a home equity line of credit is the ease of accessing and repaying funds as needed — without needing to apply for and manage individual loans. Plus, a HELOC typically offers a lower interest rate than other forms of credit, such as a credit card.
Get consistent payments with a Fixed-Rate Advance
HELOCs have a variable interest rate that fluctuates based on the prime rate set by the federal government. However, with Wells Fargo, you may have the option of taking what’s called a Fixed-Rate Advance.
With a Fixed-Rate Advance, you’re able to convert some or all of your HELOC’s balance to a fixed-rate repayment. This structure can be an appealing option if you like knowing that you’ll have a set payment for a period of time or if you want to reduce the amount of interest you pay by locking in a fixed interest rate that may be lower than current or future variable rates.