Have you done the math? Have you discovered that a home equity line of credit may help you reach your financial goals faster than you ever thought possible? And, are you wondering what benefits your HELOC lender should offer?
If so, it’s time to look at your options for financing. Lenders are required to provide disclosure documents that outline the elements of the loan. Take this part of the process seriously. Ask questions and thoughtfully consider the lender who best meets your need. An ideal HELOC product should be able to deliver on every item on this list. If it can’t, you may be selecting a less-than-optimal choice (and paying more interest)!
Must-have Benefits Your HELOC Lender Should Offer
Traditional HELOCs are a very manual process. Your paycheck is direct deposited to your home account, then transferred to pay down the HELOC balance. But what if you forget to move your money? It means you could lose days every month where your money is sitting idle – and not at work for you. Automation makes the process easier. It eliminates the possibility of human error and helps you get the most out of this financial approach.
2. A HELOC Access Card
It’s like a credit card but draws from the HELOC. You can use it to pay any bills for which you’d normally use a credit card. This option adds flexibility to your life and makes sure you can use the HELOC to its full potential. In fact, the HELOC can become your operating account. You shouldn’t need a traditional checking account. However, if you treat your HELOC like a separate loan and split your money into separate accounts, the process won’t be as effective as it could.
3. True Interest-Only Payment
Interest-only payments mean more of your income each month is being used to pay down the balance of the HELOC. However, some lenders require mandatory payments of interest + a percentage of the balance or interest + a percentage of the HELOC limit. For that reason, look closely at these terms with each lender you evaluate. Because a true interest-only payment is available. You just need to find a lender that offers it.
4. Direct Deposit to HELOC
Most banks don’t offer direct deposit to a home equity line of credit. In fact, only one that we’re aware of does. This feature keeps you in control of your money, meaning it should be a high priority when researching lenders. Instead of direct deposit, most lenders use a sweep account to transfer money into a HELOC. Sweep accounts are bank accounts automatically set up to transfer funds over a certain dollar amount into another account (in this instance a HELOC) at the close of business each day.
Even if you’re perfect at moving money to the sweep account the day you get paid, you still pay a higher interest than you could for 24 days a year because of the lag time between your initial paycheck deposit and when your cash makes it to the HELOC.
Occasionally missing a day or forgetting over the weekend to transfer funds also results in higher interest for even more days each year. What’s more, while your money is in transit from the sweep account to the HELOC, you don’t have access to it.
When you select a lender that doesn’t offer direct deposit, you’re missing out on this method’s interest-saving advantages. The takeaway? Without direct deposit, you’re paying more interest than necessary.
Are your ready to put your entire income to work? Our lender’s HELOC terms are objectively the most borrower-friendly. Learn more about the qualification process by filling out this illuminating survey. Or to dig deeper into the first-lien HELOC approach to building generational wealth, download the e-book Take Control of Your Equity today.