Future Homeowners Guide to HELOC

Planning Your Financial Future

Even if you’re not a homeowner yet, knowing about Home Equity Lines of Credit (HELOC) and fixed-rate mortgages can help you make smart financial choices later. Both options have their perks, and this guide will help you figure out which one might be right for you.

What is a HELOC?

A HELOC lets homeowners borrow money using the value of their home as security. It works like a credit card but usually has lower interest rates.

• How It Works: You can borrow money up to a certain limit during a draw period, pay it back, and borrow again as needed.
• Interest Rates and Payments: HELOCs have variable interest rates, so your payments can change based on market conditions.

What is a Fixed-Rate Mortgage?

A fixed-rate mortgage is a home loan with a set interest rate for the entire term of the loan, which means your monthly payments stay the same.

• How It Works: You get a lump sum to buy a home and pay it back over 15, 20, or 30 years.
• Interest Rates and Payments: Fixed-rate mortgages have stable interest rates and monthly payments that don’t change.

Comparing HELOCs and Fixed-Rate Mortgages

• Flexibility vs. Stability: HELOCs give you flexibility with money you can use as needed, great for ongoing projects or unexpected costs. Fixed-rate mortgages provide stability with predictable payments, making it easier to budget.
• Interest Rates: HELOCs have variable rates that can start low but might increase over time. Fixed-rate mortgages lock in a rate, protecting you from future increases.
• Usage: HELOCs are good for home improvements, debt consolidation, or big expenses. Fixed-rate mortgages offer stability and predictability in your monthly payments, making them a great choice for buying your first home or refinancing in the future.

Preparing for Homeownership

Start planning now. A good credit score helps you get better loan terms and interest rates. Managing debt well and saving for a down payment can reduce future mortgage burdens and build home equity faster.

Make Smart Financial Choices

Both HELOCs and fixed-rate mortgages are tools for homeowners. Knowing how they work can help you make better financial decisions and build a secure future. Not sure which option is best for you? Talk to a financial coach today for personalized advice on choosing the right loan for your needs.