Home prices in the US are soaring, with double-figure increases across just under 80% of the market. The median home price saw an increase of 16%, which might be tough on first-time homebuyers, but really good news for homeowners looking to build some equity. Equity happens to be a great way to access some extra cash to pay for renovations, pay for a special event, or even buy a large asset like a car or recreational vehicle. One of the ways to tap into a property’s equity is through a HELOC.

What is a HELOC?

A home equity line of credit (HELOC) is a secure loan that accesses the equity you’ve built up in your property. The facility works like a revolving credit facility, only that this particular loan type uses your home as security for the loan. This means that it’s important to keep servicing the loan, as failure to pay can lead to foreclosure on the loan.

It’s worth noting that in times where financial institutions tighten the belt on credit products, a HELOC might be hard to access.

How to calculate the equity in your property

Equity is the difference between the amount owing on your property and the current market value. That means that if you have an outstanding mortgage of $250,000 on a property valued at $400,000, you have $150,000 equity.

Why a HELOC is a good choice

With a HELOC, all those months of diligent mortgage payments pay off as the equity in your property grows. Some of the advantages include:

  • Generally cheaper rates than other types of finance: Applying for finance can be costly, especially where fees and interest are concerned. For instance, the APR for personal loans ranges anywhere from 2.49% to 35.99%. Credit cards are generally in the 16.3% APR range, however, can go much higher. HELOCs range from 1.99% to 7.24% APR.
  • Only use it when you need it: A HELOC is a revolving facility which means you only pay for the portion you use, in terms of interest. That means if you don’t want to access the money just yet, it can just sit tight until you need it.
  • It’s your cash to use as you wish: Whether you’re using it to fund your child’s education or for that kitchen revamp, the choice is yours. You might even enjoy tax benefits on some of the spend, such as home improvements or upgrades, particularly those to make your home more energy-efficient.
  • You may have access to more cash: depending on the equity buffer you’ve managed to build up in the property, you may have access to a higher loan amount through a HELOC than other loan types, such as credit cards. This makes it easier to tackle those cash-heavy projects all at once, without having to apply for multiple financial products.

Some things to consider when applying for a HELOC

HELOCs can be a simple way to access a larger amount, however, there are some things to consider before applying.

  • Ensure affordability: It’s important to have the means to repay the loan, as the property itself stands as security for the loan. That means that if the HELOC isn’t serviced, the lender can take steps to foreclose on the property.
  • There are often fees involved: Origination fees are one of the typical fees associated with a HELOC and can be a percentage of the application amount or a fixed fee across the board.
  • Loan amounts might have a cap: Whether you have a property worth $300,000 or $3,000,000, lenders might cap your lending at a percentage of the value of your property (for instance, 80% of the loan to value or LTV amount) or a max loan amount irrespective of whether your property has a far higher value.

How a HELOC works

A HELOC is a facility that your lender sets up against the equity of your property. If your lender allows a 100% HELOC with a cap of $250,000, and you have $250,000 equity in your property, you can apply for that full $250,000 when you meet the qualifying criteria.

This facility allows you to use the funds at will, which means you can access it daily if you need to. Furthermore, you only pay interest on the amount you’ve used and the period you’ve used it for. One of the best characteristics of a HELOC is the ability to repay more than the installment amount to get your loan down quicker when you deal with a lender that offers 0% prepayment penalties.

What can a HELOC be used for?

A HELOC works best when you’re looking to fund a large expense that cannot easily or cheaply be accommodated through other loan types. Some examples of what HELOCs are used to fund, include:

  • Higher education - While student loan rates are around the same as HELOCs, if you can save a percentage or two, it can save hundreds to thousands of dollars over the loan period. This option comes in handy when a parent wishes to pay for their child’s education but hasn’t saved enough.
  • Home remodels - What better way to use the equity of your property than to increase it even more? Work with an estate agent or industry professional to ensure that the property isn’t overcapitalized.
  • Weddings - The average cost of a wedding in California is around $39,000 which can be a pricey item to fund with credit cards or other finance.

How Figure helps

HELOCs are slowly disappearing off the offering list of many lenders, however, Figure recognizes the need for simple, easy, and affordable access to a larger line of credit. Customers enjoy a 100% online process that means never having to set foot in a brick-and-mortar bank or have an in-person appraisal done, which saves time and money.

The process boasts a response time of 45 seconds and an online notary service in some of the states. The application process includes an offer page that matches your unique info to the best offer on the market, without affecting your credit score. The hard credit check only happens when you’re ready to proceed with the loan. You also don’t need to send through a mountain of paperwork, as the intuitive process includes linking to your relevant financial institutions, giving Figure the ability to instantly assess your assets and liabilities.

Figure’s HELOC offers one of the fastest turnaround times in the market. The 100% redraw options is another way Figure sets itself apart from the market, as 90% can be expected from many of its competitors.

What sets Figure apart from its competitors, is its use of Blockchain technology.

Why Blockchain is better

Blockchain is fast becoming an essential way to do finance, simply because of its immutable quality. This means it can’t be changed or tweaked, it simply uses the information as-is and captures the correct, incorruptible version of an application. It's a safe and trustworthy method of doing finance.

Using a HELOC to get cash

As a property owner, a HELOC remains one of the best ways to get your hands on a loan. Apply for your HELOC with a turnaround in as little as five days today.