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Setting Up a HELOC Before You Retire to
Tap into Your Home’s Equity

by Mike Selner

A home equity line of credit, or HELOC, is a revolving line of credit that allows homeowners to borrow against the equity they’ve built up in their home. During the draw period, which usually lasts 10 years (or more if an extension request is granted), you can borrow from a certain limit of funds set by the lender, make minimum payments, and carry a monthly balance, functioning similarly to a credit card. In the draw period, you would only be required to pay towards interest. After the draw period is the repayment period, usually lasting 20 years, where you are required to make payments towards both principal and interest. Requirements for acquiring a HELOC vary by lender, but generally a potential borrower should come to the table with a good credit score (in or above the mid-600s), low debt-to-income ratio (<43%), reliable payment history, sufficient income, and at least 15 to 20% equity in their home.

Provided you make payments on time, adding a HELOC to your credit portfolio would present you with a great opportunity to raise your credit score. Most lenders also provide borrowers with flexible repayment options. HELOCs allow you to borrow only what you need, so you can use the funds when its convenient for you and you won’t have to make payments on funds you’re not using. HELOCs tend to have both lower interest rates and lower initial costs than credit cards. Further yet, interest on your HELOC may be tax deductible up to a certain amount (based on the combined interest of the first and second mortgage) if the funds are used on home improvements.

To get started on setting up a HELOC, contact me to get an idea of your eligibility to receive one and what you can do with it.

Brown, Jerry (2022). “Requirements for a home equity loan or HELOC In 2022” [Article]. Bankrate. [Accessed September 28, 2022]

Johnson, Holly D. (2022). “The pros and cons of a home equity line of credit” [Article]. Bankrate. [Accessed September 28, 2022]

Kurt, Daniel (2022). “A Guide for Home Equity Loans and HELOCs” [Article]. Investopedia. [Accessed September 28, 2022]