HELOCs - Quicken Loans Zing Blog

There are few things in life better than a pop quiz. A rush of unpreparedness, butterflies in your stomach, cold sweats…Ah! The thrill of it all! Let’s revisit those painful school memories, shall we?

Question 1: A HELOC is…

a)     Nothing…it’s not real. Don’t look at me. I DIDN’T STUDY I WASN’T EXPECTING THIS.

b)     A beautiful and terrifying cross between He-Man (The Most Powerful Man in the Universe) and a Morlock (a fictional species created by H.G. Wells for his 1895 novel, “The Time Machine”).

c)      Also known as a home equity line of credit, a HELOC is a mortgage that’s similar to a credit card.

d)     All of the above.

Pencils down. If you answered B, I applaud your imagination and reference level (and if you want to draw a picture of this wonderful beast, please be sure to send it to content@quickenloans.com). But the correct answer, ladies and gentleman, is C. Let’s take a closer look at the wonderful world of HELOCs, shall we?

What Is a Home Equity Line of Credit?

Let’s say you want something. Maybe you need a new roof on your house, or you want to take a vacation, or maybe you just have so many geeks in your life that you need some extra cash to afford all the nerdy holiday gifts you require this season. A home equity line of credit can help you with that. Using the equity in your home, a HELOC allows you to borrow, pay off and re-borrow funds that you can use for whatever you want. It’s kind of like using a second mortgage like a credit card.

Pros and Cons of HELOCs

There are advantages and drawbacks to getting a HELOC. Here are a few:

  • YAY – Interest rates on HELOCs tend to be very low!
    BOO –HELOCs are similar to an adjustable rate mortgage, but without adjustment caps, so your rate can go up or down as the market changes, meaning that low introductory rate may not be low forever.
  • YAY – You are only charged interest if you withdraw the money!
    BOO – Like a credit card, you can be tempted to spend beyond your means.
  • YAY – Starting a HELOC is usually low cost. There tends to be a small fee for setting up the account, and an annual fee for keeping it open, and some HELOCs may not have any closing costs.
    BOO – There are lots of ways costs can add up with HELOCs. Some HELOCs have interest-only payments or prepayment fees that can lead to high costs down the road. Fluctuating monthly payments due to interest rate adjustments can make it difficult to budget and plan.

 

Does Quicken Loans Offer HELOCs?

No, Quicken Loans does not currently offer HELOCs. However, a Home Loan Expert can talk to you about your financial goals and help you make the decision that’s right for you.

If the interest-only period of your HELOC is expiring soon, you might want to consider refinancing to get out of your HELOC. You can roll your HELOC into your new mortgage and make one low monthly payment, which could save you from fluctuating payments or large jumps in your monthly payment.

Everyone’s financial situation is different, so be sure to consider all of the pros and cons and speak to a professional before deciding what’s right for you. And look out for that other kind of HE-LOCK. You know, the one I made up at the beginning of this post that is living a constant internal struggle between good and evil, never knowing whether to give in to his cannibalistic instincts or fight Skeletor for the good of all mankind. That one.

Thoughts, questions, concerns about HELOCs or HE-LOCKs? Let us know about it in the comments!

 

This Post Has 14 Comments

    1. Hi Daniel:

      We don’t offer HELOC loans, but we do offer cash-out refinances. You may find you get a better rate on a cash-out refi because it’s based on your primary mortgage rather than a secondary one. If you would like to go over your options, you can do so at Rocket Mortgage or give one of our Home Loan Experts a call at (888) 980-6716.

  1. I want to ready my home for sale and roughly estimate it will run between $35-$75K. I presently have a quicken mortgage on the property with no second mortgage, etc. I estimate it will take 12-24 months for the preparation and sale. What do you suggest?

  2. Wrong, wrong, and wrong. The reason they don’t offer HELOCS is because you would be able to pay down your principal faster and save tens of thousands of $$ AND reduce a 30 year fixed loan to a mere 5 to 7 years. Don’t believe it? Believe it. It’s simple math.

    1. Hi Rick:

      A HELOC can be the right move if you’re in the right financial position. However, they come with variable interest rates and sometimes end in balloon payments. We’ve made a decision as a business not to offer these.

      I also want to note that we don’t have any prepayment penalty on our loans, so anyone that gets a loan through us can pay down the loan as fast as they want.

      Thanks,
      Kevin Graham

  3. Really great article. Nice explanation of HELOCS. My eyes usually glaze ove at the mention of such things but the fun way the article is written made it easy to understand (Yay and Boo way more fun than Pro and Con…lol) Thank you so much for giving me such a clear picture!

  4. I have refinanced last year with quicken loan. I have equity built up in my house now and I’d like to take either A-line of credit or re finance not sure it’s my best option.

    1. Hi Albert:

      We don’t do home equity lines of credit, but we do offer cash-out refinances. You might find that this is better for you because you tend to get a better rate on your primary loan anyway. We can certainly help you go over your options. If you’d like, you can get a full refinance approval through Rocket Mortgage. Otherwise, one of our Home Loan Experts would be happy to speak with you if you give us a call at (888) 980-6716.

      Thanks,
      Kevin

  5. So I have about 50,000 in equity on my home. I need to turn a utility room into a bathroom to keep from moving. What is my best option?

    1. Hi Lilia! It sounds like you have quite a bit of equity in your home. If you’re looking to use that equity to fund a home improvement project, a cash-out refinance might be a good option for you! This converts the existing equity in your home into cash that can be used for anything. The benefit of using a cash-out refinance, compared to a home equity loan, is that a cash-out refinance wouldn’t be adding a second mortgage to your home, so it’s less risky for a lender and you’ll be able to secure a lower rate. The best thing to do would be to talk to one of our Home Loan experts at (888) 980-6716 to discuss your options. I hope this helps! 🙂 -Allison

  6. I have my mortgage with quicken loans and want to pay off credit cards. I only need 20,000 . What is the cheapest way to achieve this?

    1. Hi Claire:

      The cheapest way to achieve this based on interest rate would be to do a cash out refinance want to working your options, do so online through Rocket Mortgage or give us a call at (888) 980-6716 and we’ll be happy to help you.

      Thanks,
      Kevin Graham

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