HELOC Mortgage Loan

HELOCs are typically paid back in two phases:

1. Draw Period:
   • Usually lasts 5-10 years
   • You can borrow money up to your credit limit
   • Monthly payments are typically interest-only, though you can pay principal if you choose
2. Repayment Period:
   • Typically lasts 10-20 years
   • You can no longer borrow money
   • You must pay back both principal and interest
   • Payments are often higher than during the draw period

The specific terms can vary by lender, so it's important to understand your HELOC's repayment structure before borrowing.

HELOC interest may be tax-deductible, but there are specific rules:

• Interest is only deductible if the HELOC is used to buy, build, or substantially improve the home that secures the loan.
• The total amount of home loans (including your first mortgage and HELOC) must not exceed $750,000 for single or married filing jointly, or $375,000 for married filing separately.
• You must itemize deductions on your tax return to claim this deduction.

It's important to consult with a tax professional for advice specific to your situation, as tax laws can change and individual circumstances vary.

A HELOC can impact your credit score in several ways:

• Credit Inquiry: Applying for a HELOC results in a hard inquiry on your credit report, which may temporarily lower your score slightly.
• Credit Utilization: Some credit bureaus treat HELOCs like installment loans rather than revolving credit. This means using your entire HELOC limit may not have the same negative impact as maxing out a credit card.
• Payment History: Making on-time payments can positively impact your credit score over time.
• Credit Mix: Adding a HELOC to your credit profile can improve your credit mix, which can positively affect your score.

Overall, responsible use of a HELOC can have a neutral to positive effect on your credit score in the long term.

The amount you can borrow with a HELOC depends on several factors:

1. Your home's current market value
2. The amount you still owe on your mortgage
3. Your credit score and income
4. The lender's policies

Typically, lenders allow you to borrow up to 85% of your home's value, minus what you owe on your mortgage. For example:

• If your home is worth $300,000
• And you owe $200,000 on your mortgage
• 85% of your home's value is $255,000
• Subtracting your mortgage balance: $255,000 - $200,000 = $55,000
• In this scenario, you might be eligible for a HELOC of up to $55,000

Remember, this is a simplified example. Your actual borrowing limit will depend on the factors mentioned above. For a personalized estimate, speak with one of our mortgage experts.