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Home Equity Line of Credit?

We are preparing to apply for a home equity line of credit (not a home equity loan) this week. Our home has about $300,000 (maybe a shade under) in equity and we live in a "hot" community. We pay our bills on time, but have a whole lot of credit card debt. We are applying to the same people who gave us a mortgage 3 years ago. What are our chances? Should we apply? Do we have a chance of being approved? We only want about 15% of the equity in the home. Thanks in advance. We don't want to look stupid or "uninformed" by doing this.

First, don't get a home equity line on your home unless you are planning to use the money to improve your home. I do not agree with consolidating credit card debt into your home. Right now, it is unsecured debt, so if you don't pay it, yeah, there's credit and judgment problems, but it you don't pay a HELOC, you could lose your home.

Another problem with HELOCs is that you use it to pay the credit cards, and then, you use the credit cards again, making your debt twice as high.

If the purpose is to consolidate debt, try a line of credit that is not tied to your home. Bank of America does them. So does Wachovia.

If you are determined to get a HELOC, your credit score and income are factors as well, not just the amount of equity you have. And just because you may qualify, doesn't mean you should.

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I agree with most of what lawmom says. HELOCS can be tricky and could cause the problems she talked about.

If you have a plan and you stick to it, it may work. Do not use the HELOC to reduce the amount you are paying towards the credit cards. If you are paying $500 to credit cards, continue to pay $500 to the HELOC or more. Put the credit cards away or cut them up.

The interest rate on the HELOC will be less than and unsecured line of credit and the credit card interest so more of what you pay (the $500) will go towards paying down the balance. Thus, paying off the balance quicker. Also, the interest may be tax deductible because it is now mortgage interest.

If you decide to get a HELOC, get as large as one as you can. The costs for most of the items such as appraisal and closing costs are the same regardless of the size of the HELOC.
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