What is a 100% HELOC (Home Equity Line of Credit)

A 100% HELOC (Home Equity Line of Credit), also known as a “Buy Out Mortgage,” is a home loan that allows borrowers to receive 100% of the equity they have in their home.

Two Types of 100% HELOC Loans
There are two main types of 100 HELOC loans: closed-end and open-end. A closed-end 100 HELOC allows borrowers to receive their full loan in a single lump sum with a fixed interest rate and repayment schedule. Closed-end 100 HELOCs often have shorter terms than open-end 100 HELOCs.

An open-end 100 HELOC presents more risk for the borrower in that it has an adjustable rate and offers revolving credit payments; however, borrowers may receive a longer repayment term or even interest-only monthly payments with an open-end HELOC.

Borrowers of a 100 HELOC must have an above average credit score (generally at least 700) in order to receive a 100% LTV (Loan-to-Value). Interest paid on a 100 HELOC may be tax deductible.

A HELOC is often called second mortgages. If you’ve taken out a first mortgage on your home, a 100 HELOC allows you to borrow 100% of your home’s current market value, minus your first mortgage’s outstanding principal. For example, if your home’s current market value is $300,000, and the outstanding balance of your first mortgage is $150,000, the estimated equity of your home is $150,000. Your 100 HELOC loan would be worth $150,000.

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