The Home Equity Line of Credit

What is a HELOC and What Can I Use It For?

Can you relate to any of the following scenarios? Two men working at a saw doing home renovations.

You’ve been thinking about renovating your gold and brown 1970’s style kitchen for some time now. Maybe taking down a wall and opening it up a bit? It might add value to your home, but the upfront cost is a bit steep...

Or maybe you have far too many credit cards than you’d care to admit, with debt starting to add up and too many payments to keep track of. You need to make some changes. It would be helpful to consolidate it all into one...

Perhaps you’re considering getting that next level certification so you can try for a promotion at work...

These are all great ideas, but the question remains- how do you pay for it?

Enter the HELOC.

When it comes to home renovations, and other expenses such as education-related bills or debt consolidation, a HELOC may be a good option for you.

So... What is a HELOC?

HELOC stands for “Home Equity Line of Credit”. What this means is that you are borrowing money against the equity of your house. Your home equity is the portion of your home that you own. In other words, it is the difference between what your home is worth, and what you still owe on your mortgage. A HELOC works somewhat like a credit card, in that it is a revolving line of credit that you can borrow from, repay, and borrow again, but usually at a lower interest rate than a credit card.

What is the difference between a Home Equity Line of Credit and a Home Equity Loan?

The main difference between a HELOC and a Home Equity Loan is that with the HELOC you only borrow what you need and can draw and repay multiple times, whereas the Home Equity Loan is an upfront sum of money that you will repay in fixed payments over a set period of time.

What are the benefits of a HELOC account?

There are quite a few benefits to having a HELOC account.

Once you apply and qualify and get the account all set in place, it’s available for whenever you need it.
Unlike a loan, you only borrow what you need, and therefore, you only pay interest on the amount you draw.
You can draw money, repay it, and draw again as often as needed.
Though it works much like a credit card, a HELOC’s interest rate is often lower than a credit card interest rate.
Depending on your tax laws, the interest may be tax deductible.
There are flexible payment options.

What are a few things to keep in mind about HELOC accounts?

When considering a HELOC, our trained loan professionals will go over the advantages and disadvantages of a HELOC with you and help you decide whether it would be a good fit for your situation. Here are a few things to keep in mind:

A HELOC is a “secure loan”, meaning you are required to put up collateral, and in this case your home is the collateral. So, if you should default on the loan, you are at risk of losing your home.
Having such easy access to cash flow can be tempting, so it is important that you are disciplined when using a HELOC and only use it for necessary purchases and payments.
If your HELOC has a variable rate, your payment might fluctuate based on market conditions.

What could I use a HELOC account for?

There are actually no restrictions on what a Home Equity Line of Credit can be used for. According to our loan officer Tom Werynski, the top five uses of HELOC accounts by Port Richmond Savings Customers are:

Home Improvements
Education Bills
To consolidate personal debt
Auto purchase
Investment purchases

I think I am interested in a HELOC, what do I do next?

If you are reading this and are thinking, “Yes! My roof isn’t looking so great, and I think I better get on that before real damage is done- let's get this HELOC thing going!”- then it’s time you talked to Tom or Diane in our loan department. They can help you decide if a HELOC would be a good fit for you, and if so, get you started on your application. Give our loan department a call today at 215-634-4621.

Download the Home Equity Line of Credit application here.

To see a listing of other Lending products, visit our Loan Department.