The ABC’s of HELOCs for Baby Boomers

Baby boomer home equity loans

Most Baby Boomers owe less on their homes than the current market value. This “equity” can be tapped much like a credit card through a Home Equity Line of Credit (HELOC). For Boomers who want a safety net for unexpected expenses, a HELOC may be the right solution.

Here are the “ABC’s” of a HELOC:

  • Amount that can be borrowed: Generally up to 80 percent of home equity as verified by an appraisal.
  • Closing costs: Can be $0, depending upon lender.
  • Current interest rates: Variable rates, starting at 5.5 percent, with a cap of eighteen percent depending on market factors. Some lenders offer a fixed rate. Your rate depends on the amount of home equity and your credit rating.
  • Loan duration: Usually a minimum of 10 years, but can be up to 20-30 years.
  • Funds availability: Via a checkbook or credit card.
  • Minimum monthly payments: Determined by lender.
  • Is the interest tax deductible: Yes, if borrowed funds are used for home improvement.
  • Gotchas: Loan duration, possible balloon payments at end of draw period, closing costs vary by lender, possible transaction fees.

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