In today’s high interest rate environment many homeowners find themselves with limited options. They don’t want to purchase a new home and get saddled with a significantly higher interest rate than their current one. And they may not want to refinance for similar reasons. Instead, homeowners should seriously consider using thethey’ve already accumulated in their current home to better their house and living circumstances.
They can finance major home repairs, improvements and renovations with aor a . These options often come with lower interest rates than credit cards or personal loans and they have favorable tax benefits if used for IRS-eligible home improvements. That said, just like any other financial product or service, there are some reliable guidelines homeowners can utilize to improve their chances of getting the best HELOC out there.
Start by exploring your HELOC options here now to see how much you could borrow.
How to get the best HELOC
There are multiple ways – and– to get a great HELOC. Here are three ways owners can get the best one now.
Shop around for lenders
There’s a common misconception that owners need to use their current lender to borrow from their existing home equity. But that’s not always the case. There are multiple banks and lending institutions that would be happy to have your business. So don’t be afraid to shop around for HELOCs. Compare rates and terms from at least three different lenders. Then take those quotes back to your current lender to see if they can meet or beat those offers.
When reviewing your options just be sure to complete an accurate, side-by-side comparison. So if you get a quote for a HELOC for $20,000, make sure to get quotes for the same amount from a second and third lender, too. This will ensure that the lender you ultimately choose was the very best of all the options considered.
Explore HELOC lenders here now or via the below table.
Improve your credit score
When applying for new credit it never hurts toas high as possible. This is also true for homeowners looking to tap into their home equity. The best terms and lowest interest rates will be reserved for those with the highest and cleanest credit histories. So make your best effort to get your credit in shape before applying. Yes, you can potentially down the line but that will be an added expense and headache that you can potentially avoid by improving your credit now.
So pay down high-interest debt and stop growing your balance as soon as possible. And don’t apply for any new credit in the interim. New applications may require hard or soft credit checks, which can ding your score and hurt your chances of scoring a low-interest rate HELOC.
Use it for the right reasons
A home equity loan or HELOC can be beneficial if used for the right reasons. Conversely, it may not be as beneficial as other credit types if used for incorrectly. Specifically, if you need to pay for majoror improvements then a HELOC is the right choice. That’s because the interest on HELOCs is usually if used for IRS-eligible reasons.
“Interest on home equity loans and lines of credit are deductible only if the borrowed funds are used to buy, build, or substantially improve the taxpayer’s home that secures the loan,” the IRS explains online. “The loan must be secured by the taxpayer’s main home or second home (qualified residence), and meet other requirements.”
This doesn’t mean that you can’t, too. But you won’t get the interest tax deduction if you use it to pay for education expenses or a wedding.
Explore your HELOC options here now to learn more.
The bottom line
A HELOC is a great resource for homeowners in today’s inflationary, high interest rate environment. But like all credit sources there are better ways to approach it than others. Specifically, potential borrowers should first shop around to make sure they’ve truly secured the lowest rate and best terms. They should also do their best to improve their credit before applying. And they should use it for the right reasons – like a home repair or improvement – in order to get the tax deduction when they file their taxes for the year they used the HELOC.
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