Life often presents significant financial needs, from essential home renovations and unexpected costs to education funding and debt consolidation. For homeowners, a Home Equity Line of Credit (HELOC) can be a powerful tool to address these priorities. Bank of America® aims to clarify how a HELOC could work for you. A HELOC is essentially a line of credit secured by your home’s available equity. Home equity is calculated as the difference between your home’s appraised value and your outstanding mortgage balance.
Generally, Bank of America allows you to borrow up to 85% of your home’s value, minus your current mortgage balance. For example, if your home is appraised at $200,000, 85% of this value is $170,000. If you still owe $120,000 on your mortgage, subtracting this amount leaves you with a maximum HELOC of $50,000.
This calculation can be represented as:
$200,000 (Home Value) x 85% = $170,000
$170,000 – $120,000 (Mortgage Balance) = $50,000 (Maximum HELOC)
A HELOC functions similarly to a credit card, offering a revolving credit line. You make payments to replenish the credit, and crucially, you only accrue interest on the portion of the credit line you actually use. With a Bank of America HELOC, you benefit from no closing costs, no application fees, no annual fees, and no usage fees. Furthermore, Bank of America provides interest rate discounts for enrolling in automatic payments and based on the initial funds you draw upon opening the HELOC.
The interest rate on a HELOC is often competitive compared to other borrowing methods, and the interest paid may be tax-deductible (consult a tax advisor for specific advice). Most HELOCs feature a variable interest rate, meaning the rate can fluctuate based on the Wall Street Journal Prime Rate. Bank of America provides an option to convert balances of $5,000 or more to a fixed interest rate. This feature allows for predictable monthly payments and protection against potential rate increases.
You can continue to draw on your home equity line of credit as needed throughout the borrowing period, typically lasting for 10 years. Following this period, a repayment phase begins, usually spanning 20 years, during which you repay the principal and interest on the borrowed amount.
If a HELOC aligns with your financial needs, consider exploring this option further. Bank of America offers various resources to get started, including phone consultations, financial center visits, and online applications at bankofamerica.com/home-equity. Inquire about available interest rate discounts, including those for automatic payments, initial fund usage, and Preferred Rewards benefits, which offer enhanced advantages as your qualifying Bank of America balances grow. A home equity line of credit from Bank of America can empower you to manage significant expenses and achieve your life priorities with greater financial flexibility.
