Lending: What’s a HELOC
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Home-Equity. It's a valuable asset.
Put yours to work for you with a home equity line of credit, or HELOC.
(Auditory Description: HELOC is pronounced HEE-lock).
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You can use a HELOC for almost anything like home improvements, which can increase your home's value.
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A HELOC can also be used for paying down high interest debt, or for large expenses like medical or education costs.
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What's home equity? It's the current market value of your home minus the amount you owe your mortgage lender.
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With a HELOC, you can borrow against a portion of your total equity.
Typically,
lenders allow you to borrow a total combined amount of 75 to 90% of your home's value.
To calculate your potential HELOC amount, simply subtract your outstanding mortgage balance.
Here's an example. A lender determines you can borrow against 80% of your home's value. Since your home is valued at $250,000, 80% of that is $200,000.
After you subtract your mortgage balance of $150,000 your potential HELOC amount is $50,000.
Your credit score and debt to income ratio also play a role in calculating your HELOC amount.
(Visual Description: Animation of a woman’s statistics being calculated. They end with a credit score of 660 and debt to income ratio of 35%.)
A HELOC is similar to a credit card, because you can withdraw funds up to your limit.
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But unlike a credit card, a HELOC uses your home as collateral, so it's smart to borrow only what you need.
Some lenders may charge you fees to open a HELOC.
Having all the information can help you figure out if a HELOC will work for you.
Generally, you can choose a variable or fixed interest rate with a HELOC, depending on your situation.
Then you'll receive a revolving line of credit available for a set period of time, known as the Draw Period.
(Visual Description: Text shows: Draw Period Start at Month 1. The animation extends to show the Draw Period End at Month 12.)
During the Draw period, you make payments towards your balance, and you can draw funds up to your available limit.
(Visual Description: Text shows: the HELOC Period Start at Year 1 with a line that connects to HELOC Period End at Year 10.)
When the draw period ends, the repayment period begins and it's your responsibility to pay off the balance before the maturity date.
(Visual Description: Text show: the Repayment Period Start at Year 10 with a line that connects to Repayment Period End at Year 20.
Think a HELOC may be right for you? We're here to help.
Reach out to discuss your home equity or visit truist.com/HELOC.
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Learn more at Truist.com/HELOC
Disclosure: Truist Bank is an Equal Housing Lender and Member FDIC, Copyright 2021 Truist Financial Corporation. Truist, Truist Purple, and the Truist logo are service marks of Truist Financial Corporation.)
