A quick guide to home equity lines of credit (HELOCs) in Omaha

Looking for flexible, affordable, low-interest credit in Omaha? A home equity line of credit (HELOC) could be the solution. If you’re new to the concept, don’t worry—we’ve got you covered. Here’s a quick guide on what a HELOC is, how it works, and why it could be the right choice for you.

What is a HELOC?

A HELOC is a revolving line of credit that allows you to borrow money as needed, using your home as collateral. It’s similar to a credit card, but with much lower interest rates. The amount you can borrow is based on the equity in your home (the difference between your home’s current value and the balance of your mortgage) as well as your financial profile. 

How does a HELOC work?

Once approved, you can access your HELOC funds over a set period, typically 5-10 years, called the draw period. Just like a credit card, you can borrow up to your credit limit as often as needed. During this time, you can also make interest-only payments or pay down the balance faster without worrying about prepayment penalties.

After the draw period ends, you enter the repayment period, where you’ll no longer be able to borrow from the line of credit, and you’ll start making payments on both the principal and interest.

What can I use a HELOC for?

One of the most appealing features of a home equity line of credit is its versatility. A HELOC gives you the freedom to use the funds however you choose. Here are some common ways people use a HELOC in Omaha:

• Home Improvements: Use a HELOC for renovations like remodeling a kitchen or finishing a basement, which can increase your home’s value.
• Debt Consolidation: Consolidate high-interest debts, such as credit cards, into a HELOC for more affordable, simpler payments.
• Major Purchases: Pay for a new furnace, large appliances or more with the benefit of a lower interest rate compared to other borrowing options.

How is a HELOC different from a home equity loan (HELOAN)?

While both a home equity line of credit and a home equity loan use your home’s equity, there’s a key difference:

• A HELOC works like a credit card—you can borrow, repay, and borrow again, paying interest only on what you’ve used.
• A home equity loan is a lump sum loan with a fixed interest rate and a set repayment schedule.

HELOCs offer more flexibility, whereas home equity loans provide a one-time payout.

Does a HELOC have closing costs?

Yes. Along with interest payments, HELOCs have closing costs that are a small percentage of your credit amount (talk to one of our experts in Omaha for precise costs). Despite closing costs, the low-interest rates of most HELOCs make them one of the most affordable credit options compared to high-interest credit cards or personal loans

How do I apply for a HELOC?

Applying for a HELOC is similar to applying for a mortgage. Here’s what you’ll need:

1. Check your credit score.

A healthy credit score could get you better terms.

2. Gather documents.

Prepare pay stubs, mortgage statements, W-2s, and proof of homeowner’s insurance.

3. Have your home appraised.

You’ll know the exact value of your home for determining equity. In the long run, a low-rate HELOC can make up for the cost of an appraisal. 

4. Complete your application.

We’ll evaluate your creditworthiness and home equity before approving your HELOC. 

Ready to open a HELOC? 

A HELOC can be an affordable, flexible option for accessing credit. If you’re considering a HELOC, learn more about our current options or talk to an expert in Omaha and apply today.