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HELOC Loans in St. Johns County, Florida: Learn About the Benefits and How They Work

As a homeowner looking for a low-cost financing solution, you should consider tapping into your home's equity. Your best solution is a home equity line of credit (HELOC), which enables you to leverage the equity you have built into your home to borrow funds. You can use these funds for various purposes, including home improvements, consolidation of debts, or any other projects/needs you might have.

Since HELOC loans enable you to borrow against your home's equity, they are a second mortgage offering a long-term and low-interest line of credit. These loans also offer the benefits of accessing a large sum of cash and the flexibility to borrow more money whenever necessary until you exhaust your credit limit.

If you are still wondering if a HELOC loan in St. Johns County, Florida is the best option for you, this guide goes through everything you should know about this loan product, including how it works, its pros, and when it's best to use it.

This guide also mentions the best ice cream spots in St. Johns County for irresistible treats.

What is a HELOC Loan?

A HELOC is a revolving credit line that lenders offer against the equity you have built in your home. Your home's equity, in the simplest terms, is the current value of your home minus your outstanding mortgage balance.

As such, by obtaining a HELOC, you will be placing your home as collateral in case you default on repayments.

With a HELOC, you can qualify for up to 85% of your home's equity. Typically, lenders will limit your combined loan-to-value (CLTV) to 85%, such that your outstanding mortgage balance plus HELOC loan does not exceed 85% of your home's current value.

Based on this requirement, having a high CLTV will necessitate you to reduce your mortgage balance or wait for your home's value to increase.

Since a HELOC is a secured loan, you will enjoy better terms and lower interest rates than most home-equity loans. However, since this loan traditionally comes with a variable interest rate, you can expect your repayment to fluctuate from time to time.

Regardless, you will enjoy better rates if, as a borrower, you have an excellent credit score, a low debt-to-income ratio, and significant equity in your home.

How Does HELOC Work?

HELOCs are a line of credit that works similarly to credit cards by enabling you to draw funds continuously against your credit line amount over a specific period. With this flexibility, you can choose to borrow as little or as much as you need while only paying interest on the amount you spend.

To qualify for a HELOC, you must be a homeowner who has built sufficient equity in your property. Essentially, this means ensuring you own a property whose outstanding mortgage balance is lower than its current market value.

Besides your home's equity, lenders will also factor in your income, credit score, payment history, and debt-to-income ratio.

A home equity line of credit has two distinctive periods - the draw period and the repayment period. The draw period is the first phase once you qualify for a HELOC when you can borrow funds up to your credit limit. This phase typically takes between five and ten years before it expires.

During the draw period, you will be expected to pay monthly interest based on your withdrawal limit and the duration of your credit line. The interest you pay can be fixed or variable, depending on the terms you agreed to when signing up for the loan. For variable interest rates, the exact percentage will be by prevailing market rates.

The repayment period is the second phase in a HELOC, and it kicks in immediately after the expiry of the draw period lasting between 10 and 20 years.

You are expected to pay off your principal amount and interest during this period, but to avoid making large monthly payments, you can pay off part of your principal during the draw period.

HELOC for Condos in Florida

It is never easy purchasing a condo in Florida when you do not have much experience with property financing. Besides meeting all the eligibility criteria to qualify for a mortgage as an individual, your lender will also have to review and approve the condo association before finalizing the deal.

With a HELOC, lenders do not have the authority to review a homeowner's association budget; as such, there is no scrutiny on the funds directed to reserves. It is also not essential to verify the fidelity bond coverage when reviewing the condo insurance. You can avoid these hurdles by opting for a HELOC to finance a condo in St. Johns County, Florida.

It gets better as a HELOC does not require a complete condo review. Instead, you only have to fill out a limited questionnaire review, which does not look into details about aspects such as the number of condo units owned by investors or those that are owner-occupied. This way, there is no chance of your deal not going through because of these aspects.

Finally, combining a HELOC with a primary mortgage allows you to borrow more funds without requiring private mortgage insurance or a high down payment.

As the primary mortgage covers a maximum of 75% financing, a HELOC covers 15% for combined funding of 90%. This reduces your down payment to 10% and eliminates the need for mortgage insurance.

HELOC text and House icon on the black sheet

Reasons Why HELOC is Great for Divorces

Going through a divorce has many challenges and pain points you must be ready to handle once you initiate the divorce process. One of the most challenging scenarios comes when you split the existing equity in a family home with your ex-spouse, as getting the equity in cash is never a walk in the park.

Fortunately, you can easily overcome this with a HELOC, which can provide you with a 100% loan-to-value ratio on the existing equity in your family home.

As a couple going through a divorce, this will give you outstanding value, unlike most other loan products in the market that never offer cash-out-refinances above 92% LTV.

You can use a HELOC to fund your divorce settlement and buy out your spouse while maintaining your primary mortgage. This way, you do not have to refinance your property and risk losing the great interest in your primary mortgage.

You can further choose to lock in a rate with a HELOC, so you never have to worry about fluctuating rates during and after the divorce.

Using HELOC for Home Improvement or Renovation

Home improvement projects are costly, and as a homeowner, a popular way to finance these upgrades is with a renovation loan. Unfortunately, these loans rely on your home's future value and have high closing costs, making them quite an expensive option.

With a HELOC, you can avoid these limitations as this loan depends on your home's current value besides having low to no closing costs.

It is also easier to get approval for a HELOC if you are pursuing a project that will improve your home's value, thanks to its flexible underwriting requirements.

This makes it the ultimate financing option if you plan to take on projects such as renovating your home's exterior, adding your home's square footage, or upgrading your kitchen, basement, & bathrooms.

Besides HELOC being an affordable home renovation financing solution, you may also be eligible for a tax deduction when you take out this loan.

Note that these tax deductions are limited and only apply to the interest charged up to a specific amount depending on your outstanding primary mortgage and HELOC loan amount.

Advantages of a Home Equity Line of Credit (HELOC)

A home equity line of credit (HELOC) provides the convenience of borrowing against the equity you have built in your home as a second mortgage.

This loan product offers a range of outstanding benefits, which is why more homeowners are opting for a HELOC in St. Johns County, Florida.

The primary advantages of getting a HELOC are:

Offer a Higher Loan Amount

A HELOC is secured with your home giving lenders the confidence that they have a property to repossess if you fail to repay them. Because of this, HELOCs will offer you a higher loan amount compared to other conventional loans, such as personal and credit card loans.

While most lenders will provide you with a loan-to-value ratio of 80% or less, your credit score and income determine the exact amount you qualify for.

Lower Interest Rates

Compared to most conventional loans, HELOCs offer relatively lower interest rates, making them an excellent option for debt consolidation or projects that require considerable funding.

Remember that HELOCs have variable interest rates, which are highly likely to change over time. The exact interest rate you will pay depends on your credit score, the amount you qualify for, and your payment history.

You Only Pay Interest On What You Spend

Since a HELOC shares a similar financing model with a credit card, it gives you the benefit of only paying interest on the amount you spend and not your total credit limit.

This is entirely different from traditional home equity loans, where interest is charged on the amount you qualify for, regardless of whether you will spend it in whole or not.

Flexible Payment Terms

A HELOC has a timeline with a draw period and a repayment period typically lasts 30 years. During the draw period, you are only to pay a minimum monthly interest as you borrow money but can opt to pay back part of the principal amount to reduce your balance.

Once the repayment period kicks in, you will have at least ten years to pay off the principal plus outstanding interest.

Ability to Lock in Your Interest Rate

HELOC loans have variable interest rates, but lenders now allow borrowers to lock in an interest rate on the part of the loan for a specific period.

Doing this can help you avoid rising interest rates as you build your outstanding balance. However, you should be ready to incur some fees and agree to a slightly higher interest rate for these benefits.

You May Be Eligible for Tax Deductions

You may be eligible for tax deductions when you use a HELOC for home improvements. But, you will only be able to claim the interest as a deduction and adhere to limitations based on combined interest in your primary mortgage plus HELOC.

No Restrictions on How You Use the Fund

When you opt for a HELOC, there will be no restrictions on how you use the funds. You are free to use the money for other purposes besides home renovations or upgrades, despite your house being collateral for the loan.

You can choose to spend the funds how you see fit, whether to pay for medical bills, education, or debt consolidation.

Exciting Promotional Offers

Since HELOC is still a relatively new loan product in the market, most lenders are offering exciting promotional offers. These include reduced interest rates and waived fees, which are meant to attract more customers.

As a borrower, this provides an opportunity to land a one-of-a-kind deal once you compare the offerings from different lenders.

HELOC vs. Refinancing - What is The Right Choice for You?

While HELOCs and refinancing are the most popular ways of converting your home's equity into cash, these two options are so different.

If you are spoilt for choice, it is highly recommendable to settle for a HELOC, which will offer you more benefits than refinancing because:

  • A HELOC allows you to borrow as high as 85% of your home's equity, unlike refinancing, which can never offer more than 80% of your home's equity.

  • HELOCs generally have lower interest rates than refinancing.

  • A HELOC allows you to qualify for a tax break if you use the funds for home improvement.

  • HELOCs have low to no closing costs, unlike refinancing, which has considerable closing costs.

You'll also appreciate the flexibility that a HELOC provides as it enables you to access funds whenever you need them, unlike refinancing, where you are provided with a lump sum.

This allows you to have access to funds for longer and avoid inconveniences when managing your home renovation project, as you can always borrow more.

5 Best Ice Cream Shops in St. Johns County, Florida

If you are looking for the ultimate ice cream experience in St. Johns County, Florida, you will be lost for choice as there are many exemplary spots for a cold treat.

To help you out, here is a listing of the five best ice cream shops in St. Johns County, Florida:

  • Island Ice Cream Café - The Island Ice Cream Café prides itself on providing its clients with ice cream flavors to die for on a budget. The café also serves coffee and tea for all those moments you prefer something hotter. This shop is a gem in Crescent Beach and a must-try out for the entire family.

  • Christy's Dream - Christy's Dream is an authentic ice cream bar that leaves nothing to chance when serving great flavors. One thing you can be guaranteed is that you will be lost for choice when it comes to picking your favorite flavor at this shop. The best part is that you can always opt for mix-ins, so you enjoy a variety with each visit.

  • Cold Cow - Cold Cow is one of the most popular ice cream and frozen yogurt shops in St. Johns County, thanks to the years of constantly serving irresistible flavors. This walk-up shop will be an exciting break for all those days when you want to indulge in cold and sweet treats.

  • Cold Stone Creamery - Cold Stone Creamery is the spot to go whenever you want more than some good ice cream and frozen yogurt. The shop serves unique juice bars & smoothies and custom cakes that will always have you returning for more.

  • The Hyppo - The Hyppo is a unique spot to get an ice cream fix, dessert treat, or coffee with the entire family. It has a nostalgic setting and quite a diverse menu that is bound to address all your cravings.

HELOC Loan - The Bottom Line

A HELOC loan is a great financing solution when you need cash but do not want to refinance your property. You can use this loan for several purposes, including home improvement, divorce settlement, and debt consolidation.

Nevertheless, before choosing a HELOC, evaluate your financial situation and goals to ensure this loan fits your needs best.

With over 50 years of mortgage industry experience, we are here to help you achieve the American dream of owning a home. We strive to provide the best education before, during, and after you buy a home. Our advice is based on experience with Phil Ganz and Team closing over One billion dollars and helping countless families.

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