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Home Equity Line Of Credit: Your Personal “Emergency Fund”

By Dan Green

Instant Access To Your Home Equity With HELOCs – Today's Mortgage & Real Estate News

Mortgage rates unexpectedly spike, changing the math of How Much Home Can I Afford for home buyers nationwide; an update on today’s mortgage rates for conforming, USDA, VA, jumbo, and FHA loans; and, using a home equity line of credit as an emergency fund and immediate source of cash.

Bad Luck For Buyers As Mortgage Rates Spike

Home equity is illiquid, and can't be spent directly - Growella
Home equity is illiquid, and can’t be spent directly

Mortgage rates have moved to a 4-year high.

It’s been a tough few days for buyers of homes and households looking to refinance existing mortgages.

After easing lower through late-February, and all of March and April, 30-year fixed-rate mortgage rates have spiked.

Since last week, rates have added a quarter-percentage point, wiping out the gains of the last ten weeks and putting a hit on home affordability.

Buyer purchasing power is off five percent — $5,000 per $100,000 of home value — which can mean the difference between buying a home with two bedrooms instead of three; that’s in need of repairs instead of move-in ready; and, that’s on a noisy part of the street instead of a quieter part.

The shift’s also moved refinancing households closer to being “out of the money” with their available refinance options.

It’s a challenging spot for today’s rate shoppers. There’s no economic news that’s making rates climb and no new data that’s been released. The best explanation for this week’s rates is that sentiment has shifted, which underscores a key Wall Street tenet: markets are unpredictable.

We can’t know if mortgage rates will rise in May or what they’ll do for the rest of 2018. For now, though, we know rates are rising so if you’re shopping for a home, use this opportunity to check with your lender and re-assess your pre-approval.

When mortgage rates change, your ability to get mortgage-approved can change, too.

Today’s Mortgage Rates

5-Day Mortgage Rates and Trends - Growella
5-Day Mortgage Rate Trend

Mortgage rates are up today, marking four straight days of rising rates. And, they’re moving up strongly.

Here’s what to expect for your mortgage rate quote as compared to earlier in the week:

Remember that the actual mortgage rate you’re quoted will vary based on about a dozen factors including the size of your loan, your credit score , and the state in which your home is located.

You’ll also get different rates from different lenders because interest rates vary from company to company; and, even a small difference in your quote can change your household budget.

Before locking in your loan, comparison shop with two or more loan officers. It will take more time from your day but it’s a statistically-proven way to save money on your mortgage.

Choose the lender with your favored combination of service, rates, and cost.

Aggressive Mortgage Rate Quotes

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Instant Emergency Fund: Your Home Equity Line Of Credit

Home Equity Line of Credit (HELOC) definition - Growella
Home Equity Line of Credit (HELOC) definition

For U.S. homeowners, the Home Equity Line of Credit can be the ultimate precautionary tool for avoiding personal finance disaster.

Home Equity Line Of Credits are a flexible-balance mortgages that convert a homeowner’s home equity into cash using a checkbook or traditional online bill payment systems.

They’re often called by their shorthand name, HELOC (HEE-lock)and are available to homeowners with average credit scores or better.

The value of a HELOC is in its setup.

HELOCs work like credit cards. You’re given a maximum balance you can borrow, you can spend as much or as little as you want, and it’s up to you to pay back what you borrow.

Also like a credit card, you only pay interest on what you borrow with a HELOC, which means that you pay nothing when the balance is zero.

And this is the genius of the credit line. You can leave the line open for use in an emergency, and get it at any time without waiting, and without having to apply for a refinance loan with your lender.

HELOCs let you can convert your illiquid home equity into cash you spend; and, that’s an excellent safety valve to have in your life.

Getting started with a HELOC is easy. A simple call to your lender can get you started. They’re typically free to open and carry an annual fee of $50.

Sometimes the fee is less.

Written by Dan Green

Dan Green is a personal finance expert and the founder of Growella. His expertise has been cited by The Wall Street, NPR, and CNBC; and, his advice has helped millions of people make better choices with their money. Dan hosts the mortgage news show "The Mortgage Minute-and-a-Half" three times weekly on YouTube.

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