What Is a Closing Line of Credit (CLoC)?

Picture this: you invite your real estate agent to view your property, and they give you a laundry list of suggestions for upgrading the home pre-sale. You’re left wondering, “Won’t those updates be pretty expensive?” 

As the saying goes, you sometimes have to spend money to make money, and getting your property in tip-top shape can be a wise investment. A turnkey home stands to earn more on a sale and attract interest faster. 

And while those may be solid arguments, they don’t solve for how you’ll come up with the funds to renovate. Sure, you have equity in the property you’re about to sell, but it’s not liquid yet. And you might not have cash on hand for home upgrades.

A closing line of credit (CLoC) is an excellent option for home sellers who need a financial boost to propel renovations. Here’s everything you need to know about how CLoCs work and how they stack up to other financial products. 

Traditional financing options for home renovations

Historically, when folks don’t have liquid funds for a major investment, like buying a home or car—or in this case, getting a property ready for sale—they tap into their savings or borrow money, often from a financial institution. Performing renovations on your home to make it market-ready can be costly, pushing you to consider one of those options. Even basic repairs and cosmetic upgrades can cost tens of thousands of dollars. 

Here are a few of the traditional options you might consider for covering renovation costs, and the pros and drawbacks of each.

Savings accounts

If you have savings you don’t immediately need for another reason and can replenish, using them for renovations might be smart. You won’t owe any interest to a lender, and you can get started on your upgrades immediately, without undergoing a loan approval process. But if touching your savings is a precarious financial move, this option may be off the table. 

Credit cards

Credit cards might be a decent option if for small purchases you can pay off quickly (and completely—not just the minimum payment). Full payment allows you to avoid steep monthly interest fees on an outstanding balance. But if your home requires significant renovations, charging them can be a slippery slope that results in growing credit card debt that’s tough to pay down.

And if financing renovations this way means taking out a new credit card, keep in mind that doing so can have a negative impact on your credit score. A lower score can prevent you from getting other types of loans you need later on, like your next mortgage.

Second mortgages 

Second mortgages are loans authorized to people who already have first mortgages. “Second mortgage” is an umbrella term for equity loans (dispersed in a lump sum) and lines of credit (dispersed in payments) that leverage a financed home as collateral. Lump sum loans have a fixed interest rate, while lines of credit have variable ones. 

Second mortgages are based on a property’s equity, which is the difference between the market value of the property and the amount remaining on your first mortgage. So, if your home is worth $500,000, and your outstanding mortgage balance is $200,000, your equity is $300,000. 

Second mortgages are a favorable option for some, thanks to low interest rates. But they can be dangerous since you risk foreclosure by putting your property up as collateral. Plus, a second mortgage appears in your credit history, which could hurt your chances if you plan to seek another loan, like a mortgage for your next home, soon after.  

Home equity line of credit (HELOC)

A home equity line of credit (HELOC) is a specific type of second mortgage dispersed in payments, not in a lump sum. HELOCs give you access to a substantial line of credit, often up to 85% of the value of your property, and you set the credit limit. As you pay off HELOC debts, your spending limit replenishes. Suppose you take out $20,000, spend $12,000, and pay back that $12,000. Your total available credit would go back up to $20,000 again. HELOCs can have draw periods (the time in which you can make withdrawals) of up to 10 years, so they may be a good option if you’re planning long-term renovations. 

A few of the key drawbacks of HELOCs include variable interest rates and the threat of foreclosure if you don’t keep up with monthly payments. And HELOCs go on your credit report and can make you a less attractive candidate for future loans. It’s also worth watching out for high draw and annual fees and other penalties associated with this type of credit. 

What is a closing line of credit (CLoC)?

Companies that empathize with homeowners’ needs for low-risk lending options that cover renovations and repairs have devised alternatives. Titus is one of those companies, having invented closing lines of credit (CLoCs)—a financing model that helps homeowners upgrade their properties before going to market. 

CLoCs are a solid option for people who are nearly ready to sell and need a financial push to get over the finish line. And that push can have a lot of inertia behind it: Titus offers lines of credit for tens of thousands of dollars for home improvements.

How does a closing line of credit work?

CLoCs are an exclusive financing option for people working with a Titus-affiliated agent. Titus only partners with the best realtors in the industry, with above-average sell-through rates and proven expertise. When you work with a Titus partner agent you get top-notch services and access to a CLoC.

These short-term lines of credit are authorized to homeowners seeking to upgrade their space’s aesthetics or fix issues that could present drawbacks for buyers, like a leaky roof or a broken fence. This financing isn’t right for folks doing extensive remodeling that could take many months or years of work.    

Repayment is triggered when a borrower sells their home (and in a handful of other outlying situations). The spirit behind a closing line of credit is to help homeowners upgrade their property to make a quick sale, and repayment is meant to be agile and painless. Debt owed is covered directly by the sale.

And in that spirit, Titus doesn’t charge any interest on credits of up to $25,000. Homeowners can borrow a higher amount of credit interest, too, should they need to do more extensive work on their homes. Finally, there are no up-front or out-of-pocket fees to secure a credit.

The bottom line: How CLoCs stack up

Closing lines of credit aim to help home sellers succeed. The following differentiators highlight how this financing style supports that objective. CLoCs: 

• Don’t take homes as collateral, so there is no foreclosure risk. 

• Don’t limit which contractors a homeowner can work with on renovations and repairs.

• Require no out-of-pocket payments.

• Are zero-interest up to $25,000.

• Help cover expenses other lending models don’t, like storage or living rentals for homeowners who need to move themselves or their items out of a space during renovations.

• Encourage working with an agent, an expert on preparing a home for a high-value sale and successfully completing the real estate transaction.

Get your home turnkey with a Titus closing line of credit

Updated, functional, turnkey homes with no hidden surprises (like a nasty leak) attract buyers. So if you’re trying to sell your home—and fast—it’s smart to get it buyer-ready. 

A Titus CLoC can cover repainting, landscaping, patching, tiling, and more. Plus, you get to partner with an expert agent who will help you sell fast and for top dollar. This professional will advise you on the renovation process and even recommend reliable contractors. Take the headache out of selling your home with Titus.