Heloc Statement

Heloc Statement– How to use your HELOC to pay off your super fast mortgage loan

What is the mortgage credit line or HELOC?

If you have used a credit card, you will easily understand the concept of a home equity line of credit or HELOC. In simple terms, a HELOC is a revolving credit, like the credit limit with your credit card. The difference is that a HELOC uses the equity of your home as collateral. Basically, it is a credit card secured with the capital of your home.

How to use your HELOC to pay off your mortgage loan super fast?

The good thing about a HELOC compared to a regular loan is that once you pay the balance, you will have more money to use again. You can continue using the line until the end of the draw period, which is usually 10 years. At that time, you can pay the balance of the reminder with a lump sum payment or refinance in another HELOC mortgage or mortgage.

The advantage of HELOC over the home mortgage is that HELOC uses simple interests, so you can pay your home A LOT before the standard 30-year AMORTIZED mortgage.

Let me give you my example. I had a mortgage of $ 247,000 with an interest rate of 4.25%. Not bad, I was paying around $ 1,300 per month to the bank. Of the $ 1,300, about $ 900 is the interest charge. So only about $ 400 is used to pay my capital, about $ 4,800 in a year.

Later, I applied for a HELOC of $ 250,000 to pay my current mortgage of $ 247,000. My HELOC has an introductory rate of 1% the first year. If I continue to pay $ 1,300 per month, I would have paid $ 13,200 in capital in ONE YEAR because my monthly interest is now only $ 200 per month.

Best of all, HELOC also acts as my emergency fund. As I pay more than the balance, there is more money available to use.

And what is real estate capital?

The accumulated value of the home is the difference between the market value of your home and the total home loan you owe. For example, your home now has a value of $ 1 million, but you have a mortgage of $ 300,000. So, in this case, the capital of your home is $ 700,000.

Most banks do not allow you to borrow 100% of their market value. The most I’ve seen are 90% and 95%.

How much of the mortgage line of credit can you qualify?

The rating is very similar to the rating for a mortgage loan. You still have to show proof of income, good credit score, evaluation, etc. The general rule to determine what you qualify for is 80% of the value of your local market minus your outstanding mortgage.

We will use the same example we used earlier. So your house is worth $ 1 million in the current market. 80% of that $ 1 million is $ 800,000. Then we subtract your current pending mortgage of $ 300,000. Therefore, you qualify for a maximum of $ 500,000 in HELOC, as it meets the credit and income qualification requirements.

Heloc Statement

Heloc Statement

Heloc Statement

How to use a HELOC to expand your real estate empire?

We hear a lot about the use of other people’s money (OPM) to invest in real estate. A home equity line of credit is one of these strategies. Technically, it is still your money, because it is your capital that you are using.

Then, in the example above, you qualify for a HELOC of $ 500,000, which can use a small rental property, all in cash. You can also buy a multi-rental property in cash. The rental income generated, which is used to pay the HELOC. Since you buy these properties with all the cash, which means an instant equity in these properties. Then you can take HELOC out of these properties and repeat the steps of buying more services or repairs and money orders, whatever your means of investment.

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