(Mar 27, 2023)
If you're considering borrowing against your home to pay off debt or take advantage of an opportunity, a HELOC loan in Okaloosa County, Florida, is your best bet. But what exactly are HELOC loans? What do they entail? And why should you get one?
This guide breaks down everything you need to know about HELOC loans and how they work to help you make an informed decision. Read on to find out more! We'll also highlight the five best places to get ice cream in Okaloosa County.
What are HELOCs?
Home equity lines of credit, or HELOCs, are revolving lines of credit secured by the equity in your home. A HELOC allows you to borrow 75% of the equity in your home (the amount you own minus what you owe on your mortgage) and then draw on it as much as you need over its fixed term.
The loans are secured by the equity in your property, which means that if you fail to repay it, lenders can seize and sell the house.
How HELOCs Work
It's similar to a credit card that lets you repeatedly access up to about 80% of your home's equity by drawing on the line, repaying it, and repeating. Unlike a credit card, HELOC guidelines can vary. Depending on the lender, repayment terms can be as long as 30 years.
Interest rates for any home equity loan, including HELOCs, are typically variable or fixed for the life of the loan. The interest rate on a line of credit is often lower than that on a traditional mortgage.
A fixed-rate mortgage typically offers stability and predictability because your rate is locked in for the duration of the loan term. In other words, you'll know what your monthly payment will be throughout the life of your loan, no matter what happens with the ongoing interest rates or inflation.
Market rates will determine your interest rate at the time of origination, so you can rest easy knowing that it will never increase during the life of your loan.
Variable-rate loans offer flexibility because they change based on market conditions but also mean greater risk because payments may rise during periods of high inflation.
The Draw Period of HELOCs
A HELOC draw period is a duration in which you can withdraw funds from your home equity line of credit. In this period, you can borrow from the credit line by check, transfer, or credit card connected to your account. Payments are typically interest-only, but you can pay the principal if your situation allows you.
The HELOC's draw period varies with the lender, but it typically lasts anywhere from five to ten years. For example, some lenders might offer a five-year draw period while others may provide a ten-year draw period. After the draw period, the repayment period will begin.
You cannot borrow against the credit line in the HELOC repayment period, but you'll pay back your loan in monthly installments, including principal and interest. In addition to the interest charges on your loan, principal payments will also increase your total monthly payments. The repayment period will vary depending on your lender but is usually twenty years.
HELOC for Condos
If you own a condo in The Sunshine State, you likely know the advantages of owning one, such as low taxes and more affordable homes than in other areas.
What you might not know, however, is that many condo owners are also able to take advantage of HELOC—which allows you to borrow against the equity in your condominium.
While this could be an opportunity to add value to your home, it's essential to understand how HELOCs work with condos.
Like any other second mortgage, HELOC loans come with unique eligibility criteria that a typical first mortgage wouldn't have on condos. Lenders typically require the Loan-to-Value (LTV) ratio, which represents the ratio of the loan amount to the condo's appraised value or sales price, whichever is less.
Lenders typically limit the LTV to 80% for a HELOC on a condo. This means you can obtain a HELOC loan amount of over 75%. You can't exceed 90% of the appraised condo value or sales price after combining the first and second mortgages for a primary residence.
Another requirement is that condos must be owner-occupied to qualify for a HELOC. The apartment must be your primary residence, and you must live there for at least most of the year. Vacation homes and investment properties do not usually qualify.
With that in mind, not all condominiums are created equal in the eyes of HELOC lenders. Some lenders may not extend their loans on specific condos, such as time-share condominiums or vacation club ones.
Additionally, some lenders may be more stringent regarding condominiums located in certain regions. Your lender may have limitations on HELOCs for condos, so check with them before applying for a loan.
Below is why HELOCs are essential for condos in Florida and make the HELOC process for condos much easier:
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Limited condo questionnaire instead of full.
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The lender doesn't care about the number of owner-occupied and investors.
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Fidelity bond coverage doesn't need to be verified when reviewing condo insurance.
- 75% maximum financing on a first mortgage and 90% combined financing on a first plus second mortgage for a primary residence.
HELOC for Divorces
When going through a divorce, one of the first things to decide is how you want to divide your assets, including your house. The good news is that HELOCs are ideal options for making this transition easier by using them as part of the divorce settlement negotiations.
The court could rule that your spouse is entitled to half (50%) of the current equity from your family home. For instance, if your family home is worth $400,000 with a $300,000 mortgage balance, your home has $100,000 in equity, meaning your spouse is entitled to $50,000. The amount seems equitable, but getting that $50,000 in cash can be challenging amid divorce.
If other options to obtain your spouse's share are off the table, you should turn to a HELOC loan. This will allow you to tap into up to 100% of your home's existing value. You can quickly open a new HELOC account for 50% of your home equity ($50,000) with little to no closing costs.
Within a few weeks, you'll have the required amount for the payout. The HELOC loan will be placed on top of your mortgage balance.
HELOC for Home Improvements
A HELOC can help you finance large-scale home improvement projects, from roof repairs to kitchen remodels and other projects that require cash flow but aren't quite large enough to warrant a loan from the bank.
However, you should consider if you have enough equity in your home to make a HELOC loan worth your while and how to use it properly and responsibly to improve your home's value.
Below are reasons why HELOCs are great for your home improvement projects in Okaloosa County, FL:
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Flexibility in terms of borrowing and repaying the money without refinancing your home.
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HELOC is based on current value, not future value like a renovation loan.
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A quicker way to improve/increase home value.
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More flexible underwriting guidelines.
- Low to no closing costs.
Benefits of Obtaining a HELOC Loan
A Home Equity Line of Credit is an easy and convenient way to tap into your home's equity, especially if you have good credit or home equity.
If you need to take out a loan and don't want to fall behind on payments, a HELOC loan can be beneficial in more ways than one, whether it's for debt consolidation, investing, or property improvements.
Below are the main benefits of obtaining a HELOC loan in Okaloosa County, FL.
Lower Interest Rates
The interest rates on a HELOC are typically lower than on credit cards or personal loans, which means you pay less interest over time. HELOCs may also be available with fixed interest rates that don't change depending on the current market conditions.
Unlike mortgages and car loans, your rate will never increase with a HELOC because it is only subject to prime rate changes. Interest rates also vary from lender to lender, so you can shop around for the best deal.
Tax Breaks
Deducting interest paid on a HELOC loan is possible if you use the cash for home improvements. When paying interest on a HELOC, those interest payments are deductible if you intend to use the loan to purchase, build, or improve your primary residence.
The deduction amount is limited to a certain threshold, depending on the total interest of your first and second mortgage.
Flexibility on Use of the Acquired Funds
Unlike most second mortgages, HELOC gives you the flexibility to use the funds however you want--helping with debt consolidation or home improvement.
Generally, you can use the cash for any purpose, whether for personal expenses or to invest in your business.
Only Pay for What You Spend
This loan allows you to borrow money against your home equity and only pay back what you spend. For instance, if your home has equity of $100,000 and you obtain a $30,000 HELOC loan, you'll only pay the interest for the $30,000 loan.
This also means you can borrow as little or as much as you want to, per your home equity.
Low-to-No Closing Costs
There are many reasons to take out a home equity loan, and low or no closing costs may be one of the most appealing. While there are fees associated with the loan, they're usually less than what you would pay at other second mortgages.
Other HELOC lenders can give you special introductory rates or waive upfront fees, which can help you save money.
You Can Borrow Enough Cash
A HELOC offers significant advantages over other loans, such as personal or credit cards. You can borrow more with a HELOC than with these other options. With a personal loan or credit card, the amount you can borrow is limited to your available credit limit.
The Top 5 Places to Get Ice Cream in Okaloosa County, Florida
There are few things better than ice cream on a warm day. With the beautiful weather in Okaloosa County, Florida, comes an appetite for ice cream and other yummy treats.
Here are 5 of the best places to grab some ice cream in Okaloosa County, Florida
Baskin-Robbins
Baskin-Robbins is the ultimate ice cream experience. With over ten flavors and multiple types of cones, you're sure to find something affordable that satisfies your sweet tooth.
From the classic flavors like chocolate or strawberry and banana to more adventurous ones like raspberry lemonade and pumpkin pie iced latte - Baskin-Robbins has something for everyone.
Dairy Queen Grill & Chill
Dairy Queen Grill & Chill is a great place for ice cream and other frozen treats. They have a variety of flavors and toppings that you can mix and match for your customized ice cream treat.
You can also order some yummy goodies like malts or shakes and get a quick delivery for a party or family event. The atmosphere is fun, with bright colors and lots of seating available.
Okaloosa National Mini Golf & Ice Cream
Okaloosa National Mini Golf & Ice Cream offers indoor and outdoor mini golf for all ages. The ice cream is made fresh and is one of the best around.
They are open throughout the week, including the weekends, making it a perfect stop for family fun any time. However, they only serve takeaway customers, but not no dine-in or delivery services.
Bippy's by the Beach Frozen Yogurt
Bippy's by the Beach Frozen Yogurt is a local favorite perfect for those looking for a delicious and nutritious treat.
They are open all year long and offer many yogurt flavors, including gluten-free and sorbet. They also have many toppings to choose from and fit your unique taste.
You can order milkshakes, soft serve ice cream cones, or dishes such as milk shakes or banana splits made from fresh fruit and dairy ingredients.
Ice Cream Shoppe of Destin, FL
The Ice Cream Shoppe of Destin is a family-owned, independent ice cream shop serving the Destin area since the1980s. The Shoppe has an award-winning menu with over 20 flavors of ice cream and many non-dairy options.
Their traditional hand-dipped cones are made fresh daily and have your favorite toppings too. They also offer party trays for any occasion. The business is open year-round and has a drive-thru window for those on the go.
Bottom Line
A Home Equity Line of Credit (HELOC) loan in Okaloosa County, Florida can be the perfect way to pay off consumer debt, fund home improvements, help children pay for college, and much more.
A HELOC works similarly to a credit card; however, the amount of money available is determined by how much equity you have in your home.
While you may have heard of HELOC loans, invest a little time to understand how this loan works, what factors influence its value, or if it's right for you before working on your application.
(Mar 27, 2023)
