How to Pay Back Your Home Equity Line of Credit
Since a home equity line of credit (HELOC) typically requires low, interest-only payments for the first 10 to 15 years of borrowing, there are clear advantages to repaying the full loan amount as quickly as possible. Here are a few ways to pay off your HELOC faster without overextending your monthly budget.
Make Extra Payments
The good thing about a home equity line of credit is that unlike a home equity loan, a HELOC typically doesn't carry prepayment penalties. This means that you can make additional payments as your budget allows. Take some time to evaluate your budget and see if you have any room to make extra monthly payments on you HELOC. Be sure to inform your lender that you would like these payments to be applied to the principal amount. Doing so can significantly reduce the time it takes to repay the loan in full.
Consider Refinancing Your HELOC
Another option for repaying your home equity line of credit faster is to refinance the loan. Refinancing a home equity line of credit allows you to replace the original HELOC with a new one. This will provide you with interest-only minimum payments for another 10 to 15 years, during which time you can continue to draw money on the loan.
Obtain a New Primary Mortgage
If you've accumulated a significant amount of equity in your property, consider refinancing your primary mortgage. Refinancing your first mortgage allows you to convert up to 80 percent of your home's appraised value into cash, which you can then use to repay your home equity line of credit in full.
Seek Help from a Mortgage Lender
The solutions listed above are just a few of the ways that you can pay your home equity line of credit back before payments on the principal amount are due to begin. Our lending specialists can help you create a repayment plan that suits your needs and personal budget. Contact us today to help you understand how to use your home equity line of credit.