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Should I Get A Reverse Mortgage Or A Heloc Credit Line?

personal finance all info

Financing your home is a journey that will impact your finances in the future. The key to getting it right many years later is in finding the best financing plan for you. You may decide to take a mortgage or a HELOC. Available data on various mortgage providers show that heloc rates Denver are lower than mortgage rates. So, which of them is best for you?

Home Equity Credit Line (HELOC)

HELOC is a home equity product that is similar to a credit card. HELOC holders can draw up to a certain limit of their home equity and payback with flexible plans and considerably lower (but fluctuating) rates. HELOC rates may fluctuate because they are tied to a benchmark.

When you take a HELOC, you are awarded a credit line for a determined period called the drawback (mostly 10 – 20 years). At the expiration of the drawback, you will enter what is called the repayment period. Repayment may be the interest-only option, or the interest + principal. The latter allows you to pay off the HELOC faster.

Qualifying for a HELOC loan will depend on certain factors like credit score, a high loan-to-value ratio, and a favorable debt-to-income ratio.

Taking a HELOC will give you access to funds which you can use for medical expenditure, education, and tuition, home improvement, and sometimes even for debt consolidation.

Reverse Mortgage

A reverse mortgage is a type of mortgage that helps homeowners to convert part of their home equity into cash. This mortgage is usually recommended for homeowners advanced in age. A reverse mortgage works in this way:

You take an equity loan. The loan provider then makes periodic payments to you based on the home equity value. This leads to an increase in debt over the years.

Why You Should Take a HELOC credit line:

  1. Taking a HELOC credit line is the best option for you if you want to pay off your mortgage faster. Typical HELOC rates Denver are flexible and lower on all mortgage periods. You can expect to repay your mortgage within 10-15 years, instead of the 15-30 ears plan which mortgages take.
  2. With HELOC, you have access to cash at all times within some limits. That makes all the difference when you are cash-strapped and need immediate access to money.

You can check with your local providers to find useful information like the HELOC rates Denver so that you can make an informed choice.

Anita Begay

The author Anita Begay