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    HELOC Coach

    Home equity = available cash. Use carefully.

    What\'s a HELOC?

    A line of credit secured by your home equity. Like a credit card backed by the house. Typical limit: 80% of home value minus mortgage balance.

    Example: home worth $500k, mortgage $200k. Equity = $300k. Lender may approve HELOC up to $200k.

    HELOC vs Home Equity Loan vs Cash-Out Refi

    • HELOC — line of credit. Borrow as needed. Variable rate. Best for ongoing needs (renovations, medical bills as they come).
    • Home Equity Loan — lump sum. Fixed rate. Best for one-time big purchase.
    • Cash-out refinance — replace mortgage with bigger one. Best when current rate is much higher than refi rate.

    When HELOC makes sense

    • Major home repair (roof, foundation).
    • Medical emergency without enough cash.
    • Bridge while waiting for IRA withdrawal or pension to start.
    • Down payment on a 2nd property.
    • Emergency fund "in case" — many open one with no balance, just for safety.
    • Short-term cash flow needs.

    When HELOC is dangerous

    • To pay off credit cards. You\'re trading unsecured debt (lose if defaulted) for secured (lose your HOUSE if defaulted).
    • Vacations, cars, weddings, or speculation.
    • Unstable income — variable rate could spike during a tough year.
    • Combined with other big debts.
    • If you\'re forgetful — a HELOC requires monthly payments forever.

    Where to get one

    • Your existing bank/credit union — usually best terms for existing customers.
    • Local credit union — typically lowest rates.
    • Bankrate.com — compare current HELOC rates.
    • Figure.com — fast online HELOC.
    • Better.com — competitive online lender.

    Watch the math

    • Variable rate = rate adjusts. Today\'s 7% could be tomorrow\'s 10%.
    • Closing costs $500-2,000 typical.
    • "Draw period" 5-10 years (you can borrow). Then "repayment" 10-20 years.
    • "Balloon" payment at end if not paid down — be careful.

    For senior homeowners specifically

    A HELOC opened for "emergency fund" purposes (carry $0 balance) is wise. Pay nothing if unused. Available if a real emergency hits. Compare to reverse mortgage — HELOC is usually cheaper and more flexible. (See our Reverse Mortgage Explained tool.)