Home Equity Line of Credit (HELOC)

This video explains what a home equity line of credit (HELOC) is and provides an example of how a lender might compute the maximum line of credit that it would be willing to provide to a homeowner.
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[@mresmith4302]

Dude, I love your videos. I grew up in a family where my parents were not financially savvy and nor were their parents. Therefore I only knew to work and put money in a saving account. I was born in the 80's so when I was a teen and in my early 20's there was no youtube and information was not exactly available from sources that would explain things in a simple manner. By watching your videos I have maximized my 401k contributions vs ROTH IRA contributions. I have been able to educate my friends as well and am now investing into real estate using knowledge you have shared. Thanks again good sir and may you be blessed.

[@Ohlaudi]

I was really confused with how HELOCs and Home equity loans work in detail including benefits and risks. You did a beautiful job explaining it start to finish. I am no longer confused. Subscribed!

[@Edspira]

Excellent! I'm glad things worked out. Take care & best wishes :)

[@FredY-cg6mi]

What if you don't have another outstanding mortgage but instead are just starting out by buying your first house? Then the balance due doesn't apply.

[@subsoil007]

Brilliant video .. thank you 🙏

[@LightGesture]

What i am curious about is consolidating debt.... But in that first 10 years, the draw period, how does paying it back look like? I want to put $20,000 into it. Is the money im paying in to it, say $300/mo going to its interest or its principal during the draw period???

[@allbeautyariethang8594]

Okay I'm still a little confused. If I take out a HELOC is my home then paid for ???

[@Edspira]

You can take out a HELOC even if you have not completely paid for your home. A HELOC essentially permits you to take out a line of credit against the equity you have accumulated in your home. Each time you make a mortgage payment, some of the payment goes toward interest and some goes toward repaying your principal (assuming you are not in a situation with negative amortization). Thus, over time you will accumulate more equity in your home as you pay off the loan principal (unless the fair market value of the home is simultaneously dropping in value). There are a lot of caveats here so I will give a very simple example. Let's say you buy a home for $200,000 with a $20,000 down payment and a $180,000 loan. The first month, you make a mortgage payment of $1,000 with $900 of that going toward interest and $100 going toward the principal. After that payment, you will have $20,100 in equity for your home. As you make more and more payments, the equity builds up and your can take out a second mortgage or a line of credit to borrow against that equity. If the real estate market collapses and the fair market value of your home decreases significantly, then you lose equity in your home even if you've been making your payments (no lender wants to lend you money against a home that is worth less than your outstanding balance on the first mortgage, because if you defaulted the second mortgage wouldn't be able to collect anything- the first lender would get the entire house.)

[@Gallardo6669]

I have a question and need an advice if this is a good idea: i have for example 15k on my regular banks savings account and let's say a montly income of 5k.now having that money lying around in the bank dont do me anything good. But i also dont wanna put it towards the principals and then its gone and i have no backup for an emergency. Now here is the idea: can i take a heloc loan for 20k and put it right away against the principals. Then i park my savings plus income back into the heloc account. As the month goes by i need to pay bills from my income, so i lower the heloc account as times goes on. So i would pay interest on the heloc within a month slowly more as time goes on, my savings would be anytime available to me, but now i save a ton on interest on my lower house loan. Part2 of the idea is to save back up the 20k and apply the same game again and again. Does that work as a smarter way??

[@robertwhite9102]

Yes..That's how it works...As long as you have more coming in then going out you're safe..If that changes then you have to pay the HELOC down then go back to what you were doing before the HELOC until you have more coming in then going out!

[@Gallardo6669]

Robert White thanks Robert. I just wonder that my bank or any other financial advisor knows or,wanna know about it

[@robertwhite9102]

This is the guy that created the strategy(Harj Gill).He's my path to getting setup with the correct HELOC!

[@bobby_digital9493]

Is it like a credit card where by you are only charged interest when you have tapped into the line. (within the window of inactivity of course) Thank you for your video.

[@Edspira]

In most cases, you are only charged interest when you tap into the line. However, most banks charge a fee for being inactive. This is a great question to ask the bank since many of the details differ depending on the lender.

[@bobby_digital9493]

Alright, that's great to know. Thanks again, I'll contact the bank I applied with. It isn't actually fully approved but in the process. Fingers crossed.

[@Jesus-kt5dc]

MY QUESTION IS IF I TAKE OUT A HELOC AND DON'T USE IT DO I STILL HAVE TO PAY INTEREST OR JUST THE INACTIVITY FEE.

[@bbb_888]

Probably both.

[@dec1slh]

@@bbb_888 why would they pay interest on something not being used? Do you pay interest on a credit card if you are not using it?

[@bobby_digital9493]

Can you refinance your HELOC once your credit improves, I applied for one with a less than good score. It will still be much better rates than CC's I am currently paying off, but once they have been paid back I feel the rate will be high as compared to how good the rate could be.

[@Edspira]

Here's a really good article that addresses this issue: www.lendingtree.com/home/home-equity/heloc/refinance-heloc/ My advice would depend on your specific situation. Thanks for watching!

[@bobby_digital9493]

Thank you so much for your help, by the way you have a FoodWishes kind of voice without the high pitch notes. Perfect KZbin trainer voice!

[@Edspira]

Thanks Dorjee!

[@Goldiney]

Disappointing you didn't go into draw and repayment periods.

[@rocky7983]

I still owe about 37k on my mortgage do I still qualify for a HELOC ?

[@lewisorman7590]

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[@philipmolokwu9271]

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[@NeonNomad747]

It depends on the market value of your house and your bank's rate for lending the HELOC.

[@sakirhossain]

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[@Thekimfowler]

i just successfully cleared off my HELOC all thanks to maliandebt

[@MrTurururu3]

yes i too used maliandebt.com to clear off my credit cards and HELOC debt

[@Thekimfowler]

@@MrTurururu3 thats awesome! they are the bomb?

[@jefferyholt6550]

@@MrTurururu3 just contacted them! thank you so much for the referral

[@teenageriot1000]

Do you recommend getting a HELOC to pay the downpayment for a new house, to rent out??

[@shepz1991]

@@MrTurururu3 thank you so much! just contacted them