CLEVELAND, April 15, 2016 /PRNewswire/ -- Steadily improving
home values means homeowners are increasingly comfortable tapping
their home equity to establish home equity lines of credit (HELOCs)
to create new cash flow.
CoreLogic Inc. data show significant increases in HELOCs offered
by lenders, with more than $156
billion in credit being extended via HELOCs. Loan volume,
while strong, doesn't measure up to the level of activity and
borrower enthusiasm for HELOCs that peaked in 2006, just before the
Great Recession. But industry data show HELOC lending is up 24
percent from 2014 and more than 200 percent from 2010, when home
equity borrowing hit its lowest point.
KeyBank shares the following tips for homeowners seeking HELOC
how-tos so they can make confident financial decisions about using
their homes' value to generate cash:
- First, be assured that HELOCs are a safe and workable way to
access cash to finance remodeling and free up finances for other
use such as paying tuition. Yes, there were homeowners who took
advantage of HELOCs and then found themselves under water when home
values took a dive. Yes, HELOC critics took issue with how some
homeowners used HELOCS, saying those homeowners turned their homes
into ATMs.
- Know the difference and comparative advantages of a HELOC and a
home equity loan:
- A home equity loan is a lump sum typically borrowed for a major
one-time expense such as buying a car, consolidating bills or a
one-time home renovation project. Loan payments are made in equal
amounts over an established period of time.
- A HELOC is access to cash on an as-needed basis, and is best
suited for ongoing needs such as home upkeep or to manage the costs
of a life changing event. HELOC payments are based on the amount of
money accessed from the line of credit. Talk to your tax attorney
or accountant for perspective on whether HELOC payments are tax
deductible.
- Take the time to talk to various lenders about their HELOC and
home equity loan products so you have a good understanding of
interest rates (variable or fixed) and repayment schedules.
- Know that relationships can make a difference. Working with a
lender that already handles your mortgage, car payment or deposits
might make a difference when it comes to fees and closing
costs.
- Seeking a HELOC to finance a specific expense? Ask for a line
of credit that is twice as much as you might need so your credit
score doesn't take a hit. Credit scores are affected by
credit utilization – literally how much credit you can access. Your
credit score might be lowered if you use more than 50 percent of
available credit. Avoid hitting the 50 percent utilization mark by
having more in your HELOC than you need. Remember – your interest
charge is based on the HELOC funds you actually use, not the HELOCs
total amount.
- Get ready to borrow. Obtain your FICO score and gather
paperwork and documentation such as W2 forms and pay stubs.
Establish what you can easily afford to pay each month by
scrutinizing your budget.
Assuming home values continue to improve, HELOCs can be an
efficient way to manage money and make the most of your home's
value.
This material is presented for informational purposes only
and should not be construed as individual tax or financial advice.
Please consult with legal, tax and/or financial advisors. KeyBank
does not provide legal advice.
About KeyCorp
KeyCorp was organized more than 160 years ago and is
headquartered in Cleveland,
Ohio. One of the nation's largest bank-based financial
services companies, Key had assets of approximately $95
billion.
KeyCorp provides deposit, lending, cash management and
investment services to individuals and small and mid-sized
businesses in 12 states under the name KeyBank National
Association. Key also provides a broad range of sophisticated
corporate and investment banking products, such as merger and
acquisition advice, public and private debt and equity,
syndications and derivatives to middle market companies in selected
industries throughout the United
States under the KeyBanc Capital Markets trade name.
For more information, visit key.com. or follow us
on Facebook or Twitter
(@KeyBank). KeyBank is Member FDIC.
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