HELOC Pros and Cons Experts Wish You Knew
The Cons of HELOCs
Despite their benefits, HELOCs come with risks. Since your home serves as collateral, failure to repay the borrowed amount can lead to foreclosure. This risk underscores the importance of careful financial planning and ensuring that you can meet the repayment terms.
HELOCs typically have variable interest rates, which means your monthly payments can increase if interest rates rise. This variability can make budgeting challenging, especially if rates increase significantly over the repayment period2.
Furthermore, some lenders charge annual fees or require a minimum withdrawal amount, which can add to the cost of borrowing. It's crucial to read the fine print and understand all potential fees before committing to a HELOC.