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The Internet Has Made Money Management Easier

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The Internet Has Made Money Management Easier

While my children will never know what life was like before the internet became popular, I do! I remember the days when you couldn't trade stocks online and most people wrote down their money budgeting plans on paper with a pencil. I have always loved the world of finance and money management, so I love learning about all of the new ways technology helps managing money and even investing easier. I can even research a company online to find out if investing in their stock is a wise decision! I know there are many people out there who get overwhelmed when trying to learn about the world of finance, which I enjoy, so I decided to start a blog to share my finance and money management tips. I plan to post about a wide variety of money topics, so come back often to find something that helps you!

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What Is A HELOC?

5 October 2017
 Categories: Finance & Money, Blog

If you need to do some massive home improvement work on your house, you are going to need to come up with a lot of money. There are various ways that you can do it. One is to use a home equity line of credit, or HELOC. But, what is a HELOC?

Home Equity Line of Credit

The equity in your home is the difference between the fair market value and the amount of principal that you have left to pay on your mortgage or any other liens against your house. You can get the equity in two different ways. One way is when you put a down payment on your house. You have purchased some equity on your house. Another way that you can earn equity on your house is if the fair market value of your house goes up, the difference between value and principal increases, meaning your equity increases. So, if the fair market value of your house is $100,000 and you still owe a principal of $75,000, then you have $25,000 equity in your house. If the fair market value goes up to $125,000, then your equity goes up to $50,000. A line of credit is similar to a credit card. When you take out a HELOC, the bank allows you to draw on the equity of your house. Since it isn't a loan, you aren't allowed to take out more than the equity of your house. Generally, you have a particular period in which you can draw on the line of credit. 

Repayment

Just like with your credit card, you have monthly payments that you will need to make. Also, like your credit card, many of your first payments are going to be interest-only payments. At the end of the term of your HELOC, you may end up with a large balloon payment. However, if you make more than the minimum payment each month, then you are going to be handling not just interest but also some of the principal. That will mean that you have a lower payment to make at the end of your term. You will also need to make sure that you are paying attention to the interest rate since it is variable. That can mean that you can end up having to pay more than you otherwise had planned on since the interest rate has gone up. 

If you are looking to make some expensive home improvements, then you need to make sure that you have a way to pay. A HELOC can help you with that. Contact a company like Rio Grande Credit Union for more information and assistance.