For Ohio homeowners, a Home Equity Line of Credit (HELOC) can provide a flexible way to borrow funds for major expenses without taking out a traditional loan. While generally used for home improvement projects, HELOCs can be used for a variety of expenses, including education expenses, unexpected medical bills, or to launch or expand a small business.

Learn more below about HELOCs, and stop by a local branch of Midwest Community Federal Credit Union today to learn more.

Lower Interest Rates and More Flexibility

 A HELOC is a line of credit that is backed up by the equity in your home, the difference between your home’s current value and any outstanding mortgage balance you have left to pay. Because your home acts as the collateral for the loan, generally interest rates are lower on a HELOC than a traditional personal loan.

Also, HELOCs are unique in that once approved, you begin a “draw period” during which you can take out funds at any time up to your approved credit limit. You are not required to take out the full amount you are approved for and you are able to take out funds at any point during your draw period. Draw periods typically last between five and 10 years.

How can HELOC funds be used?

While HELOC funds are traditionally used to pay for home improvement projects, these funds aren’t restricted to just housing. HELOC funds can be used to pay for education expenses like tuition or books; large purchases like buying a car or paying for a wedding; or even to launch or expand a business.

During the draw period, you will only pay interest on your HELOC. Then, once the draw period ends, you will begin payment on principal, as well as interest. Midwest Community offers fixed terms (5, 10 or 15 years), but repayment periods typically range from 10-15 years.

What to Know

While home equity loans often have fixed interest rates, HELOCs often include a variable interest rate with certain exceptions. And since your home acts as collateral for your HELOC funds, if you fail to pay back the principal and interest, a lender has the right to claim your home.

Also, while you may be approved up to a certain amount for your HELOC line of credit, you want to be careful not to overspend and only draw funds you have a plan in place to pay back as soon as the draw period ends.

Learn More

At Midwest Community Federal Credit Union, we have a number of tools available to help you meet your financial goals. As always, we encourage you to stop by a local branch today to learn more!