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Trick or treat: 7 money tips

A home equity line of credit
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A home equity line of credit

A home equity line of credit, or HELOC, can be a trick or a treat depending on your finances and the arrangement, says Jill Gianola, CFP and author of "The Young Couple's Guide to Growing Rich Together."

But a lot of homeowners focus only on the sweet side, she says.

The treat: "The interest rates are so low right now," Gianola says. "So it seems like a wonderful way to borrow money. They can dip in when they want and out when they want, and all they have to pay is the interest."

The tricks:

  • Most HELOCs have variable rates. "When the interest rates go up, they can go up significantly."
  • Banks can cut or eliminate available credit at any time in response to decreasing home values or changed personal circumstances (such as job loss), Gianola says.
  • After 10 years, you have to start repaying what you borrowed. When you sell the home, the HELOC must be repaid immediately.

One alternative is to get a fixed-rate cash-out refinance. "A home equity line can be a very good thing," says Gianola. "Just be aware of the potential gotchas."


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