HELOC Loans in Putnam County, Florida

With good home equity, you may qualify for 90% combined first and second mortgage financing, leaving you to pay a down payment of just 10% for a condo in Florida.

What is a Home Equity Line of Credit (HELOC)?

A home equity line of credit, or HELOC for short, is a low-cost form of credit secured against the value of your home equity.

Even though it is a set amount of cash, it isn't paid out in one lump sum like a traditional loan. Instead, you can borrow small amounts and repay them over time, much like a credit card.

Because a HELOC is secured against your home equity, lenders are willing to offer lower rates than you'd typically get on other personal loans. Furthermore, the borrower can use the money at their discretion without exceeding the set limit.

What is Home Equity?

Your home equity is the difference between the value of your home and your mortgage balance. If your home is worth $200,000 and you owe $120,000 in mortgage loans, your home equity would be $80,000.

Home equity loans offer more competitive interest rates than unsecured borrowing sources like credit cards. As such, you get to pay much less in financing fees for a sizeable loan. HELOC interest rates may sometimes be as low as those of first mortgages.

Qualifying for a HELOC

Equity loan eligibility depends primarily on property value and creditworthiness, which HELOC lenders express as a combined loan-to-value (CLTV) ratio.

The CLTV ratio determines the set amount you qualify for. Suppose your lender offers a CLTV ratio of 75% on your $600,000 home. If you currently have a $220,000 mortgage balance, you may qualify for an extra $230,000 in the form of a HELOC.

Your eligibility will also depend on the factors that qualify you for your first mortgage, namely, your income, employment history, and credit score. A higher credit score, for example, means a lower risk of defaulting on your loan, which can make your bank more comfortable offering you a lower interest rate.

HELOC and home equity loans are underwritten like other home loans since they are second mortgages.

How a HELOC Works

A home equity line of credit works much like a credit card. You can access as much of this revolving source of funds as you need at your discretion.

Apart from being a good source of emergency funds for homeowners, a HELOC can also be helpful for investors. The most common use of equity-based lines of credit is home upgrades, which is sensible because it raises the home's equity again, increasing the maximum credit amount.

A HELOC also has many perks that make it attractive to investors seeking low-cost loans:

• Unlimited access to funds - Like a credit card, HELOC can be accessed anytime, and you can withdraw as much as you please. That makes it a convenient source of income in a pinch.

• Cheap to finance - Home equity lines of credit have very few (if any) closing costs, and they tend to offer variable interest rates.

• Low and flexible interest rates - HELOC has low and variable interest rates. Some lenders may offer fixed interest rates for a specified number of years or money.

• Tax-deductible interest - The low-interest rates you pay on your HELOC are tax-deductible.

• Conveniently accessible - Funds can be withdrawn by connecting a credit card to your HELOC account, making it quick and easy.

• Untapped funds don't charge interest - You only pay interest on the money you borrow, not your maximum credit amount.

Staking a line of credit on your equity is not just a great way to access funds for investment but a viable source of emergency funds in times of unemployment, medical emergencies, and even legal contests.

The 10-Year Draw Period

Home equity credit lines tend to be divided into two phases - a draw period and a repayment period.

The funds are accessible during the draw period, which typically lasts up to 10 years. You can request an extension after this period is over to stall the loan from entering the second phase.

During the draw period, most HELOC contracts require no more than interest-only payments. That's optional so that HELOC loans can be very manageable during the first phase. Of course, you can choose to pay more and have it go towards the principal.

The second phase, the repayment phase, can last up to 20 years. During this period, you also start making payments on the principal. Note that you cannot access HELOC funds during the repayment period.

HELOC vs. Home Equity Loans

A home equity credit line is different from a home equity loan. Although they both use the value of your equity as collateral, getting a home equity loan is much closer to the traditional process that involves closing costs and high-interest rates.

The Differences between HELOC and Home Equity Loans.

HELOC

• Benefits - Withdraw money whenever you need it, and pay interest on what you borrow.

• Best use case - For situations that require continuous access to funds.

• Disbursement - Revolving line of credit for a pre-approved amount of money.

• Repayment - Interest-only during the draw period, the full monthly payments in the repayment period.

• Interest rates - Usually adjustable, but may be capped or set to a fixed rate by the lender for a specific period of time.

• Closing costs - Not usually present, but when they are, they tend to be much lower than those of conventional one-time loans.

• Drawbacks - Easy to use for nonessentials.

Home Equity Loan

• Benefits - Fixed repayment costs.

• Best use case - For situations where a one-time lump sum is required.

• Disbursement - One-time lump sum amount.

• Repayment - Fixed monthly payments.

• Interest rates - Generally fixed.

• Closing costs - Similar to first mortgage closing costs (2% – 5% of the loan amount).

• Drawbacks - Higher interest rates than HELOC.

HELOC vs. Home Refinancing

Even compared to traditional home refinancing, HELOC proves slightly more advantageous. In many cases, getting a HELOC is more financially sound than refinancing your home. This is because:

• HELOC contracts have very small or no closing costs, making them more affordable to finance.

• They have lower interest rates, usually variable, but can be fixed for a specific period.

• Homeowners can use HELOC for purposes other than renovating and rebuilding their homes.

• HELOC can be used to consolidate high-interest debts such as credit card debt by replacing them with a low-cost line of credit.

• Payments for HELOC are significantly lower during the draw period.

Of course, refinancing your mortgage isn't always the less desirable idea, especially if you're only after improving your home to make it more livable while increasing equity.

HELOC might be cheaper to finance, easier to manage, and conveniently accessible, but it also comes with unnecessary temptation. It's not uncommon to find people using this line of credit to finance overseas trips, expensive cars, or college education.

The Best Reasons to Opt for a Home Equity Line of Credit

What is the best way to utilize the equity you've worked hard to build?

For most, the answer lies in investing. If you've been considering purchasing a condo as your new primary residence, a HELOC can come in clutch.

Home equity credit lines are far more helpful than conventional loans due to the freedom it gives borrowers to use money at their discretion.

Because of this, and because it allows borrowers to take out small amounts when they need it, this line of credit can be handy for unexpected fees and purchases.

Here are some scenarios where opting for a HELOC may be the best action.

When Buying a Condo in Putnam County, Florida

The 75-15 HELOC for condos in Florida is precisely what you think it is - a piggyback mortgage plan. With HELOC, buyers can secure first and second mortgage financing of up to 90 % of the property's value.

It's easy to see why the 75-15-10 is favorable to investors. For starters, it allows you to put down as little as 10 % without private mortgage insurance (PMI) and inflated interest rates.

Furthermore, shaving 10% off the down payment allows some buyers to stay within conforming loan limits, eliminating the need for excessive jumbo mortgages.

The 75-15-10 piggyback mortgage structure looks can be broken down as follows:

• The primary mortgage finances 75% of the purchase cost.

• 15% of the purchase cost is extended via a second mortgage, usually a HELOC.

• The down payment covers 10% of the cost.

Using the 75-15 HELOC to get a condo in Florida is a good idea primarily because it helps you avoid exceeding the conforming loan limit Freddie Mac and Fannie Mae set. In 2022, the conforming loan limit for most states is $647,200. Loans exceeding this maximum loan limit are considered jumbo loans with stricter qualifying rules and cost more.

Borrowers of the 75-15 HELOC for condos in Florida are also eligible for Limited Condo Review, which expedites the process by overlooking various aspects.

Some of the perks you might enjoy include:

• Limited condo review – Lenders may shorten the condo review process and skip the budgets.

• No scrutiny on funds directed to reserves – Most lenders don't have the authority to analyze association budgets.

• No verification of the fidelity bond coverage – Lenders won't ask to verify the fidelity bond coverage when reviewing condo insurance.

• Up to 90% combined financing – 75% maximum financing on the first mortgage and 90% combined financing for the first and second mortgage.

• Limited condo questionnaire – A shorter condo questionnaire is issued, making the process faster and smoother.

HELOC is very important for condos in Florida. It can make buying a condo in Putnam County much easier.

When Settling a Divorce

A HELOC can be helpful in a lot of scenarios. One of them is when settling a divorce case. You might be hesitant about staking your home equity to pay divorce fees, but there are considerable benefits to using this route.

A HELOC is like a second mortgage, so you can leave your primary mortgage intact. Secondly, most lenders are comfortable offering a 100% combined LTV (loan-to-value) ratio, which means you can access all the equity you've built over the years.

Crucially, opting for a HELOC allows you to keep the interest rate on your 1st mortgage. Refinancing your mortgage always risks losing a great interest rate, which is why HELOC is a safer bet.

With a HELOC, you can also lock in a rate after closing the deal, which is not an option you get with other mortgage loans.

A HELOC can be a great way to settle divorce fees and pay alimony, especially since it has a 10-year draw period during which borrowers are only required to pay interest.

Home Improvements and Renovations

From a financial standpoint, one of the best uses for a HELOC is the renovation and remodeling of your home. It is also one of the most convenient ways to secure a home improvement loan if you consider the low closing costs and the flexible underwriting guidelines.

It is indisputably one of the soundest ways to utilize a home equity credit line because remodeling increases the value of your home. Using your HELOC to increase your available equity will only grow the maximum amount you qualify for.

Using HELOC for home improvement is also great because it attracts tax breaks and deductions. The IRS allows HELOC borrowers to write off a portion of the interest for their home equity credit line if used for home renovation projects.

You will need to itemize your home improvement deductions before you qualify for a tax break. As of 2022, couples can deduct interest on up to $750,000 if they file together or $375,000 if they file separately. These limits and restrictions are instituted by the Tax Cuts and Jobs Act (TCJA) of 2017 and will run until the end of 2025.

Homeowners looking to upgrade before selling their homes can use the equity they already have to increase the value of their property, which is far more affordable and manageable.

The Benefits of Using a Home Equity Line of Credit (HELOC)

• Lower financing costs compared to many other types of home loans.

• Revolving funds can be accessed in portions, and interest is only charged on the funds withdrawn.

• Large cash amounts are available depending on the size of your home equity.

• Tax breaks for homeowners that use the funds to renovate or improve the property.

• Depending on certain factors, variable interest rates may be lower or higher, but lenders also offer fixed interest rates for added safety.

• Interest-only payments during the 10-year draw period.

• Ability to repay the loan in full without incurring penalties.

• Looser verification when purchasing a condo using the 75-15 HELOC.

• Does not affect the first mortgage or its interest rate.

• Borrowers can get up to 100% LTV for divorce settlements.

The Best Ice Cream Spots in Putnam County, Florida

From Dairy Queen to Baskin Robbins, ice cream lovers will find that Putnam County has everything they need to satisfy their sweet tooth cravings.

Putnam County is a great place to live and an even better place if you're a lover of delectable flavors of ice cream and frozen yogurts. Here are some of the ice cream spots in Putnam County that never disappoint.

Hoot Owl Farm House

When in Palatka, Hoot Owl Farm House should be your first stop. This mom 'n' pop may also serve burgers, hotdogs, and fries, but the show's star is its excellent soft serve.

If you like to sample a variety of flavors, they have more than a handful you can try. Aside from its tasty treats, the place has a relaxing, kid-friendly environment where you can kick back and kill off a few hours every Sunday.

Dairy Queen

If you crave premium ice cream, there is a Dairy Queen right where you need it. This Palatka Dairy Queen is open seven days a week and features all your tasty favorites plus much more.

There's no better way to cure an acute ice cream craving than a quick run to a Dairy Queen. This kid-friendly establishment is also a great place to visit on weekends and holidays, especially if the whole family loves ice cream!

Baskin Robbins

Still within Palatka, Putnam County, is a Baskin Robbins, a premium ice cream shop to satisfy your most intense ice cream cravings.

The location stays open seven days a week from 5 a.m. to 12 a.m. so that you can get your fix, no matter how early or late. They serve only the best flavors and offer enough variety to satisfy even the finickiest ice cream lovers.

Final Word

If you're interested in a home equity loan, you'll find a lot of value in a home equity line of credit. It is an exceptionally affordable type of loan that allows borrowers much more freedom, whether they're looking to buy a new property, remodel their existing home, or pay for emergency expenses such as hospital bills.

HELOC works like a very low-interest credit card, so borrowers have the luxury to withdraw only as much as they need. Interest is only charged on borrowed money, not the maximum loan amount, so it is considerably cheaper to service.

Getting a 75-15 HELOC may be the quickest and cheapest way to secure a condo in Florida if you're already a homeowner. There are fewer closing costs to contend with, much less red tape to skip, and the benefit of a low-interest rate despite being a second mortgage.

If you're sitting on considerable home equity and need access to additional funds, consider getting a home equity line of credit.