Tag Archive for: HELOC

HELOC Rates: Where Are They Now and Where Are They Going?

Categories: ,

Today we are going to discuss HELOC Rates: Where are they now and where are they going? HELOC rates have been shifting, and if you’re thinking about tapping into your home’s equity, now is the time to understand where they stand. Over the past year, rates have dropped, and many experts predict they will continue to go down. But should you wait, or is now the right time to get a HELOC? In this guide, we’ll break down where rates have been, where they are now, and what you can expect in the coming months.

Where Have HELOC Rates Been?

Over the last 12 months, HELOC rates have been on a slow but steady decline. The prime rate, which HELOCs are based on, has dropped to 7.5%. This means that if you qualify for a good HELOC, your interest rate should be around 7-8%.

Where Are HELOC Rates Now?

Right now, the average HELOC rate sits around 7.5% to 8%, depending on the lender and your credit profile. Here’s how HELOCs compare to other types of debt:

  • HELOCs: Around 7.5% – 8%
  • Credit Cards: Around 24% – 29%
  • Home Improvement Store Cards: Over 29%

For those looking to consolidate debt, a HELOC is currently about one-third the cost of credit card interest.

Where Are HELOC Rates Going?

Most experts expect rates to continue decreasing over the next 12-24 months. If the Federal Reserve lowers its rates, the prime rate will drop too. Since HELOCs are tied to the prime rate, your interest rate will go down automatically.

Should You Wait for Rates to Drop?

No! If you need a HELOC now, don’t wait. Here’s why:

  • HELOC rates adjust downward when rates drop, so you benefit automatically.
  • The money saved from consolidating high-interest debt now outweighs any small rate decrease in the future.
  • HELOCs are cheap and easy to refinance, so you can switch to a better rate later if needed.

HELOC vs. Cash-Out Refinance: Which is Better?

For most people, a HELOC is a better option than refinancing their mortgage. Here’s why:

  • HELOCs keep your low mortgage rate intact. A cash-out refi could mean going from a 3-4% mortgage rate to 6-7%.
  • HELOCs only apply to what you borrow. You don’t pay interest on unused funds.
  • Cash-out refinances combine your good mortgage debt with bad debt. This increases your overall interest costs.

How to Find the Best HELOC Rates

Not all HELOCs are priced the same. Every lender adds a margin to the prime rate, which affects your final interest rate. To get the best deal:

  • Shop around. Credit unions and regional banks often have the lowest margins.
  • Look for a margin of 0% or lower. Some lenders offer negative margins, meaning your rate could be below prime.
  • Avoid high closing costs. Most HELOCs cost $200-$500, but some lenders charge thousands.

HELOCs Are Great for More Than Just Debt Consolidation

While many use HELOCs to pay off high-interest debt, they’re also useful for:

  • Home improvements – Increase your home’s value or make it more comfortable.
  • Cash flow management – Use it to cover short-term expenses and pay it back quickly.
  • Unexpected expenses – Keep funds available for emergencies.

Don’t Wait – Take Advantage of HELOC Savings Now

If you have high-interest debt, waiting to get a HELOC could cost you hundreds per month in extra interest. Since HELOCs are easy to refinance, there’s no reason to delay. Lock in a lower rate now and benefit even more if rates drop later.

Use our HELOC Shopping Guide (link below) to compare lenders and find the best rate for your needs.

Have Questions?

Leave a comment or reach out, we’re happy to help! Contact us today to find out more!

Watch our most recent video to find out more about HELOC Rates: Where are they now and where are they going?

 

0 Comments/by

Debt Consolidation EXPOSED: Do It the Right Way!

Categories: , ,

Today we are going to discuss debt consolidation exposed: Do it the right way! The numbers don’t lie. We’re going to show you how to pay less instead of falling into a massive debt trap. If you’ve been told that consolidating debt with a new mortgage is the best move, think again.

What’s the Goal of Debt Consolidation?

For most people, lowering their monthly payments is the top priority. However, here’s the problem. Most lenders and TV personalities only focus on monthly payments instead of total debt costs.

At Smart With Debt, we love debt, when it’s used the right way. We believe in good, healthy debt that keeps more money in your pocket, not the lender’s.

So, let’s break down the numbers as well as expose the real cost of debt consolidation.

The $200,000 Debt Mistake

Let’s look at an example of a homeowner trying to consolidate debt:

  • Original Mortgage: $300,000 at 4% interest (from four years ago).
  • Current Mortgage Balance: $277,000 with 312 payments left (26 years).
  • Credit Card Debt: $30,000 across three cards at 21-24% interest.
  • Total Monthly Payments: $2,432 (Mortgage: $1,400 + Credit Cards: $1,000).

The goal? Lower the payments. But watch how lenders trick you into paying far more in the long run.

Refinancing at 7%: A Costly Move

If you refinance your $277,000 mortgage today at 7% interest, your new mortgage payment would be:

  • New Mortgage Payment: $1,800 per month.
  • New Loan Term: 30 years (360 payments).
  • Total Interest Paid Over Time: $664,000!

That’s over $200,000 MORE than your current loan!

Now, what if you refinance both your mortgage and your $30,000 credit card debt into one new loan?

  • New Loan Amount: $312,000 at 7%
  • New Payment: $2,075 per month (Yes, slightly lower)
  • Total Debt Paid Over Time: $747,000!

You just turned a $30,000 problem into a $747,000 mistake!

This is what lenders aren’t telling you.

The Right Way to Consolidate Debt

fInstead of rolling everything into a new mortgage at a higher rate, try this instead:

First, Keep Your Mortgage Intact.

  • You already have a low rate (4%)—don’t touch it!

Second, Use a Home Equity Loan Instead.

  • A fixed-rate home equity loan at 8% costs much less over time than refinancing your whole mortgage.
  • Loan Amount: $31,000 (credit card debt + closing costs).
  • New Payment: $376 per month (over 10 years).

Third, New Total Monthly Payment:

  • Mortgage ($1,400) + Home Equity Loan ($376) = $1,776 per month.

You save money upfront AND in the long run.

Key Takeaways: The Smartest Debt Strategy

  • Leave your low-rate mortgage alone!
  • Use a home equity loan to tackle high-interest debt.
  • Lower your payments AND reduce your total debt cost.
  • Avoid the debt trap of long-term refinancing!

Calculate Your Best Option

Want to see how this works with your numbers? Use our free Smart With Debt Calculator to compare:
Refinancing vs. Home Equity Loan
Total Interest Paid Over Time
Monthly Payment Breakdown

Download the calculator today!

Watch our most recent video to find out more about: Debt consolidation exposed: Do it the right way!

0 Comments/by

Hidden Wealth in Your Home: HELOC Qualification Breakdown

Categories: , ,

Today we are going to talk about hidden wealth in your home. Unlocking the hidden wealth in your home starts with understanding how a HELOC (Home Equity Line of Credit) works as well as how to qualify for one. Let’s break it down step-by-step, so you can see if this option works for your needs.

What is a HELOC?

A HELOC is like having a financial safety net. It’s a second mortgage that lets you borrow money based on your home’s equity while keeping your existing mortgage in place.

Here’s the key: A HELOC is tied to your home’s lendable equity, which depends on your property value as well as how much you still owe on your first mortgage.

How Lenders Calculate HELOC Amounts

Everything comes down to CLTV (Combined Loan-to-Value). This calculation determines how much equity you can access.

Here’s how it works:

  1. Determine Your Home’s Value


    Find your property’s current market value. Use tools like Zillow or Redfin for a quick estimate or check with a local appraiser.

  2. Know Your Current Mortgage Balance


    Look at your latest mortgage statement to see what you still owe.

  3. Calculate Lendable Equity


    Most lenders allow between 80% and 90% CLTV. Multiply your home’s value by the lender’s CLTV percentage, then subtract your current mortgage balance.

Example:

  • Home Value: $400,000
  • Lender’s CLTV: 85%
  • Current Mortgage: $280,000

Calculation:

  • $400,000 × 85% = $340,000
  • $340,000 – $280,000 = $60,000 of available equity for a HELOC.

Why Choose a HELOC Over a Cash-Out Refinance?

To clarify, HELOCs are often better for smaller, flexible borrowing needs:

First, Lower Costs: No need to refinance your first mortgage, avoiding high closing costs.

Second, Keep Your Low Rate: If your existing mortgage has a great rate (e.g., 3%), you keep it intact.

Finally, Flexibility: Borrow only what you need, when you need it.

In most cases, you can access 5–10% more equity with a HELOC compared to a cash-out refinance.

How to Shop for the Best HELOC

  1. Compare Lenders: Start with local credit unions or mid-sized banks—they often offer the best terms.
  2. Focus on CLTV and Rates: Higher CLTV percentages and lower rates can save you money.
  3. Use Tools to Compare: Download our free HELOC Shopping Scorecard to track offers and find the best deal.

Take Control of Your Home’s Equity

In conclusion, a HELOC offers more than just money, it gives you options. Whether you’re funding home improvements, consolidating debt, or creating an emergency fund, your home’s hidden wealth can help you get there.

Start today by calculating your CLTV and comparing lenders. Smart debt is the key to paying less interest and keeping more money in your pocket.

Contact us today to find out more about: Hidden Wealth in Your Home: HELOC Qualification Breakdown

Watch our most recent video to see the calculations step by step! 

0 Comments/by

What Is a Second Mortgage?

Categories: ,

Today we are going to answer the question, “what is a second mortgage?” A second mortgage is a loan that lets you borrow money against the equity in your home. Equity is the difference between your home’s value and what you owe on your first. For example, if your home is worth $300,000 and you still owe $200,000, you have $100,000 in equity.

With a second mortgage, you can use that equity to fund big expenses like home improvements, debt consolidation, or even investing in real estate. But unlike your first mortgage, a second mortgage doesn’t replace your current loan. It’s an additional loan on top of what you already owe.

Think of your home like a pie. The first mortgage claims the first slice. A second one gives you access to another slice of your home’s value, but it also comes with monthly payments and interest.

There are two main types:

  1. Home Equity Loans – You borrow a lump sum and pay it back over time.
  2. Home Equity Lines of Credit (HELOCs) – Similar to a credit card, you borrow as needed up to a limit.

Remember, a second mortgage uses your home as collateral, which means you could lose it if you don’t repay. That’s why it’s important to know the costs and risks before jumping in.

If you’re smart about it, a second mortgage can help you achieve your goals without selling your home. It’s a powerful tool when used wisely!

Contact Us Today! 

What is a second mortgage and is it right for you? Contact us today to find out more about how to turn your debt into your friend instead of your enemy! 

Free Tools For You! 

We also have free tools available! Accelerate Debt Payments Calculator to see which debt option is best for you! 

Learn more!

Visit our YouTube channel to learn more about using debt instead of letting debt use you!

0 Comments/by

What Is a HELOC and Why Do You Need One?

Categories: , ,

Today we are going to answer the question, “what is a HELOC and why do you need one?” A HELOC, or Home Equity Line of Credit, is a powerful financial tool that lets you tap into the equity in your home. Whether you’re looking to consolidate debt, pay for home improvements, or manage unexpected expenses, a it can help you lower your overall cost of debt, but only if you manage it responsibly.

HELOC Defined:

A HELOC is a mortgage on your property. Unlike credit cards, which are unsecured, it requires you to pledge your house as collateral. This means the loan is secured by a lien on your home, which puts your property at risk if payments are not made.

This option can serve as either a first or second mortgage. For example, if you already have a mortgage on your home, the HELOC acts as a second mortgage. But if your home is paid off, it can serve as a first mortgage. Typically, you’ll qualify for more funds if it’s in the first position.

How Does a HELOC Work?

A HELOC functions much like a credit card. You are approved for a maximum line of credit—for example, $50,000. During the draw period (usually 10 years), you can borrow from this amount as needed. If you take out $10,000, you still have $40,000 available. Once you pay down the balance, those funds become available again.

After the draw period ends, the HELOC enters the paydown period. At this point, you can no longer borrow, and the remaining balance converts to a fixed loan with regular payments.

Example of HELOC Payments:

Payments during the draw period are interest-only. For instance, if you borrow $10,000 from a $50,000 line of credit at an 8% interest rate, your monthly payment would be approximately $67. By contrast, credit cards often require payments three times as high, just in interest! This makes HELOCs a more cost-effective way to manage debt.

5 Benefits:

  1. Lower Interest Rates: HELOCs generally have lower rates than credit cards. For example, transferring $10,000 in credit card debt to a HELOC could reduce your interest cost from $2,400 annually to just $800.
  2. Low Closing Costs: Unlike a full refinance, which can cost $6,000 to $12,000, a HELOC often has closing costs of less than $400 when working with credit unions or banks.
  3. Flexibility: Use your HELOC for anything, home improvements, debt consolidation, or even a vacation. The draw period allows you to borrow and repay funds repeatedly.
  4. Access to Cash: HELOCs let you transfer funds directly to your bank account. For example, if you need to pay a contractor in cash, you can easily move money from your HELOC.
  5. Customizable Payments: During the draw period, you can choose to make interest-only payments or pay extra to reduce your balance faster. This flexibility can help you manage your finances more effectively.

3 Drawbacks:

  1. Risk to Your Home: Since a HELOC is secured by your property, failing to make payments could lead to foreclosure.
  2. Variable Interest Rates: Most HELOCs have variable rates tied to the prime rate. If rates rise, your payments will increase.
  3. Ease of Access: While the ability to borrow easily is a benefit, it can also be a drawback if you’re tempted to overspend.

Qualifications:

Your credit score plays a big role in qualifying for a HELOC. For instance, someone with a 780 score may qualify for a higher loan amount and a better rate than someone with a 680 score. Lenders will also evaluate your income, loan-to-value ratio, and how you plan to use the funds.

For example, using the HELOC for home improvements may make lenders more favorable, as these improvements increase the property’s value.

Where to Get a HELOC:

Local and national credit unions often provide the best rates and lowest closing costs. For instance, some credit unions waive fees if you keep the HELOC open for a few years. Compare offers from multiple lenders to find the best deal, focusing on the margin, the amount added to the prime rate. A lower margin or even a negative margin can save you thousands.

Get Started Today:

A HELOC is a fantastic tool when used responsibly. By lowering your debt costs, you can free up money for other areas of your life. Whether it’s consolidating credit card debt or funding home improvements, a HELOC can help you take control of your finances. Explore your options, shop for the best rates, and make your money work harder for you!

Contact us today to find out more about HELOCs and how they can help you take control of your debt!

Watch our most recent video to find out more about: What Is a HELOC and Why Do You Need One?

 

0 Comments/by