Interest Heloc – Why it is the best loan you can get!

If you are among the few people who have equity in their house and are eligible to get a Home Equity Line of Credit loan, get it right now! And get the maximum limit the bank is willing to give you. It is absolutely the best type of loan out there in many ways. Here are some of the great advantages of a Home Equity Line of Credit (HELOC).

• You will not have to pay any interest if you do not withdraw any cash from it.
• Once you get the line of credit, you can draw from it anytime you want upto the maximum limit. You will only be charged interest for the amount you draw.
• The interest rates for HELOC are very low right now. You can get a loan for Prime rate or sometimes even prime rate – 0.51%. The Prime rate right now is 3.25% for most banks.
• Once you get the line of credit, you line of credit maximum draw amount does not go down even if your house value goes down.
• All the interest payments are tax deductible.
• This is one of the best reasons. It can be your safety net in case you lose your job and have to foreclose your home. Assume your house is worth $400,000 and you have a first loan of $300,000 and $100,000 line of credit on it. Lets say the your house value has gone down to less than $300,000 and you lose your job. You can draw the $100,000 from your HELOC, put it in a bank and then foreclose your house. In this scenario, you will have $100,000 in your bank versus if you did not get a HELOC you would have nothing! This reason alone should make it a no-brainer for you to get this loan!

The only possible (not probable) downside to this is if you draw all the amount and neither lose your job nor your house and the Prime rate goes up in 5 to 6 years (It definitely will not go up before then), you might end up paying a couple of percent more interest. That’s the worst-case scenario which is no so bad at all!

I personally took my HELOC about 2 years ago when my house price still was good and I have a HELOC interest rate of Prime – 1.01% if I withdraw more than $50,000 and Prime – 0.51% if I withdraw less than $50,000. I have drawn about $120,000 from it and pay a interest rate of about 2.24%. Isn’t than a sweet deal!! And as for the $120,000, I have bought other real estate with it with positive cash flows (After paying the really low 2.25% interest). I used Third Federal for my HELOC. Unfortunately, they do not do HELOC for California anymore but they do for other states.