With a HELOC, you’re borrowing against the available equity in your home and the house is used as collateral for the line of credit. As you repay your outstanding balance, the amount of available credit is replenished – much like a credit card. This means you can borrow against it again if you need to, and you can borrow as little or as much as you need throughout your draw period (typically 10 years) up to the credit limit you establish at closing. At the end of the draw period, the repayment period (typically 20 years) begins. Show
Qualifying for a HELOCTo qualify for a HELOC, you need to have available equity in your home, meaning that the amount you owe on your home must be less than the value of your home. You can typically borrow up to 85% of the value of your home minus the amount you owe. Also, a lender generally looks at your credit score and history, employment history, monthly income and monthly debts, just as when you first got your mortgage. Variable interest rateWhen you have a variable interest rate on your home equity line of credit, the rate can change from month to month. The variable rate is calculated from both an index and a margin. An index is a financial indicator used by banks to set rates on many consumer loan products. Most banks, including Bank of America, use the U.S. Prime Rate as published in The Wall Street Journal as the index for HELOCs. The index, and consequently the HELOC interest rate, can move up or down. The other component of a variable interest rate is a margin, which is added to the index. The margin is constant throughout the life of the line of credit. As you withdraw money from your HELOC, you’ll receive monthly bills with minimum payments that include principal and interest. Payments may change based on your balance and interest rate fluctuations, and may also change if you make additional principal payments. Making additional principal payments when you can will help you save on the interest you’re charged and help you reduce your overall debt more quickly. Fixed interest rate optionSome lenders, including Bank of America, offer an option that allows you to convert a portion of the outstanding variable-rate balance on your HELOC to a fixed rate. Payments you make on a balance at a fixed interest rate are predictable and stable and can protect you from rising interest rates. Learn more about Bank of America's Fixed-Rate Loan Option Homeowner tip:Ask your lender if there are any fees associated with your HELOC. There may be up-front fees, such as an application fee, an annual fee and a cancellation or early closure fee. Bank of America HELOCs don't have any application fees, annual fees or closing costs. An early closure fee applies with a Bank of America HELOC if you close your HELOC account within 36 months of opening it. The length of time it takes to pay off a home equity loan or line of credit is largely driven by the interest rate paid on the outstanding balance, how much you continue to use the line of credit and what monthly payment is made each month. Decreasing any additional charges to your line and increasing monthly payments are an effective strategy for paying off the outstanding balance in a shorter time period. Use this calculator to find out how long it will take to pay off your home equity loan or line of credit.  Content Type: Calculator Print this Article Related Topics
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Article provided by Fintactix © 2015 Fintactix The calculations provided by this calculator are based entirely on the information you enter, including any loan amount and/or interest rate. These calculations do not reflect the terms available for any Regions loans or whether you qualify for any Regions loan. Find out more about Regions loans. How do you pay off a HELOC?During the draw period, you'll make monthly payments of the interest on the amount borrowed from the HELOC. Once repayment begins, your monthly payments will cover principal plus accrued interest to pay off the total amount borrowed by the end of your repayment term.
How long do you have to pay off an equity line of credit?How long do you have to repay a HELOC? HELOC funds are borrowed during a “draw period,” typically 10 years. Once the 10-year draw period ends, any outstanding balance will be converted into a principal-plus-interest loan for a 20-year repayment period.
Can I pay off my HELOC early?You can typically pay off your HELOC early without penalties, but check with your lender before doing so to make sure you don't incur any fees.
How do I pay off my mortgage early with a HELOC?Consider a HELOC to Pay off Your Mortgage. HELOCs often have lower interest rates than mortgage payments.. When approved for a HELOC, you could choose to pay off your mortgage right away and then make payments to your HELOC instead.. Pay attention to the terms on your HELOC compared with the mortgage you are paying off.. |
How to pay off home equity line of credit
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