HELOCs are Getting Popular Again

Banks are proactively pushing home equity lines of credit (HELOCs) to homeowners whose properties have regained much of the value they lost during the housing crisis. With rates averaging 4 percent to 7.25 percent, home equity borrowing is regaining appeal.
A home equity line of credit works a bit like a credit card.
You get a variable interest credit line of up to a certain dollar amount and can tap it as often as you like.
You generally pay interest only for up to 10 years, what’s known as the “draw period.” After that, you must begin paying back interest and principal.
The amount you can borrow — typically ranging from $10,000 to $1 million — depends on things such as the value of your home, how much you owe on your first mortgage and your credit score.
Lenders are now requiring higher credit scores. The average credit score for HELOC borrowers in 2015 was 774, more than 30 percent higher than a decade ago, according to CoreLogic.
In addition, lenders have grown more conservative about how much they’ll lend. Today, the average HELOC loan-to-value ratio is just over 60 percent.

- Sunil Sethi

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