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Home Equity Line of Credit in Delaware
Delaware is one of the most sought after states to live in because of their competitive housing market and low cost of living. The average home within the state sells for roughly $250,000 with most of these houses being single-family properties. Appreciation values on homes have gone up tremendously over the past few years, making buying a house in Delaware a wonderful investment opportunity. Because of the large number of homeowners within the area and the appreciation values, many owners are choosing to go with a home equity line of credit to provide them with additional money for their lifestyle.
What is a Home Equity Line of Credit?
A home equity line of credit, also known as a HELOC, is essentially a revolving credit line much like your typical credit card. You’re able to borrow any amount of money you need at any time by using the credit card attached to the account. You cannot exceed your allotted credit limit or else you’ll be subject to fees and penalty charges. You only need to pay back the amount you actually borrow from the credit line, which is different from a loan where you have to pay back the entire amount borrowed. In short, you’re using the equity of your property to open a bank-approved credit card.
What Makes HELOCs Different From Loans
When you take out a home equity loan, you’re borrowing against the equity of your home in a large lump sum. With a HELOC, you’re only opening a line of credit and it is up to you to take out money when it is needed. This prevents a huge amount from having to be repaid, saving you from years worth of repayment bills. Home equity credit lines are ideal for homeowners who don’t necessarily have a good credit score since the bank looks at your home’s value as opposed to the signer’s FICO score. However, similar to what you’d find with a loan, you’ll need to pay off the entire credit line if you should go to sell your house. Your home is used as collateral by the bank if you avoid repaying the due amount. It is crucial that you take repayment seriously as many people have lost their homes to foreclosure because of an open HELOC.
What Can This Line of Credit Be Used For?
You can use your HELOC the same way you would any other credit card. If you have emergency expenses to make or are simply looking for additional money for shopping and bills, opening a credit line is advantageous to homeowners in Delaware. You shouldn’t use the line of credit for frivolous spending because, ultimately, your home is on the line. If you don’t repay the borrowed amount, you could easily lose your house and put your family on the street and this can be devastating when knowing that you used the HELOC to buy clothing, make unnecessary purchases or use it to supplement your income in an effort to earn more.
How Much Money Can You Borrow?
All banks are different in what they allow for a HELOC, but the average borrowed amount is 85 percent of the appraised value of your property. You should ask your lender if there is a minimum withdrawal amount that you should be aware of, since this gives you an idea of what you’ll be able to pull from the account at any given time. Some banks even allow their clients to use checks against the credit line, but most will issue a credit card that can be used similarly to any other credit card that you have.
There is often a draw period specific to the HELOC you’ve taken out, which is the time you have to withdraw money from the account. Once this time period ends, you can choose to renew the credit line in order to continue using it or simply let it close out naturally. You then need to pay back your balance within a fixed period of time. Most HELOCs have what is known as a variable interest rate, which means the rate will change depending on the current market in your area. These rates can seem tempting because they look quite low at first, but they can go up over time and cause your payments to skyrocket to a ridiculous amount. When looking to take out a home equity line of credit, compare different banks to get the best rate.
Banks in Delaware Offering Home Equity Lines of Credit
- Flagstar Bank
- Wells Fargo
- WSFS Bank
- U.S. Bank National Association
- Santander Bank N.A.