Equity FAQ

1. Home Equity Basics
1.1 What is home equity?
1.2 How can I use the funds from a home equity loan or line of credit?
1.3 What are the benefits of borrowing against my home equity?

2. Home Equity Line of Credit
2.1 What is a home equity line of credit?
2.3 Can I get a home equity line of credit for a rental or vacation property?
2.4 What is the interest rate on the home equity loan?
2.5 What are the upfront closing costs?
2.6 What are the repayment terms during the loan?
2.7 What are the continuing costs?
2.8 What are the repayment terms at the end of the loan?

3. Home Equity Loan
3.1 What is a home equity loan?
3.2 How much can I borrow?
3.3 Can I get a home equity loan for a rental or vacation property?

4. Home Equity Loan Process
4.1 How do I apply?
4.3 How soon will I know if I've been approved for a home equity account?
4.4 Does a home equity loan or line of credit constitute a lien on my home?
4.5 What happens if I sell the house before the loan or line of credit is paid off?

5. What’s the difference between a Home Equity Line of Credit and a Home Equity Loan?

1. Home Equity Basics

1.1 What is home equity?

Home equity is the value of your house minus the mortgage and any other liabilities. As your home's value increases, so does your equity, because you would have more cash after selling the house and paying off your mortgage.

1.2 How can I use the funds from a home equity loan or line of credit?

Once the account is funded, you can use funds for any personal, family, or household need. Consolidating debt, financing home improvement projects, and paying for a child's education are common reasons why people tap into home equity. Read more about using your home equity.

1.3 What are the benefits of borrowing against my home equity?

If you need access to cash, borrowing against your home equity may have tax advantages (consult your tax advisor) and may offer a lower interest rate than other options, such as credit cards or personal loans.

2. Home Equity Line of Credit

2.1 What is a home equity line of credit?

A home equity line of credit is a form of revolving credit with a specific credit limit. To access your available credit limit, just write a check for $500.00 or more. You begin making payments only on the amount of the line you've used. Click here to apply online.

2.3 Can I get a home equity line of credit for a rental or vacation property?

Yes. You can secure a line of credit with a one- to four-unit single-family dwelling that you own, but is not your principal residence. Click here to apply online.

2.4 What is the interest rate on the home equity loan?

Interest rates for loans differ, so it pays to check with several lenders for the lowest rate. Compare the annual percentage rate (APR), which indicates the cost of credit on a yearly basis. Be aware that the advertised APR for home equity credit lines is based on interest alone. For a true comparison of credit costs, compare other charges, such as points and closing costs, which will add to the cost of your home equity loan. This is especially important if you are comparing a home equity credit line with a traditional installment (or second) mortgage, where the APR includes the total credit costs for the loan.
In addition, ask about the type of interest rates available for the home equity plan. Most home equity credit lines have variable interest rates. These variable rates may offer lower monthly payments at first, but during the rest of the repayment period the payments may change and may be higher. Fixed interest rates, if available, may be slightly higher initially than variable rates, but fixed rates offer stable monthly payments over the life of the credit line.
If you are considering a variable rate, check and compare the terms. Check the periodic cap, which is the limit on interest rate changes at one time. Also, check the lifetime cap, which is the limit on interest rate changes throughout the loan term. Ask the lender which index is used and how much and how often it can change. An index (such as the prime rate) is used by lenders to determine how much to raise or lower interest rates. Also, check the margin, which is an amount added to the index that determines the interest you are charged. In addition, inquire whether you can convert your variable rate loan to a fixed rate at some future time.
Sometimes, lenders offer a temporarily discounted interest rate -- a rate that is unusually low and lasts only for an introductory period, such as six months. During this time, your monthly payments are lower too. After the introductory period ends, however, your rate (and payments) increase to the true market level (the index plus the margin). So, ask if the rate you are offered is "discounted," and if so, find out how the rate will be determined at the end of the discount period and how much larger your payments could be at that time.

2.5 What are the upfront closing costs?

When you take out a home equity line of credit, you pay for many of the same expenses as when you financed your original mortgage. These include items such as an application fee, title search, appraisal, attorneys' fees, and points (a percentage of the amount you borrow). These expenses can add substantially to the cost of your loan, especially if you ultimately borrow little from your credit line. You may want to negotiate with lenders to see if they will pay for some of these expenses.

2.6 What are the repayment terms during the loan?

As you pay back the loan, your payments may change if your credit line has a variable interest rate, even if you do not borrow more money from your account. Find out how often and how much your payments can change. You also will want to know whether you are paying back both principal and interest, or interest only. Even if you are paying back some principal, ask whether your monthly payments will cover the full amount borrowed or whether you will owe an additional payment of principal at the end of the loan. In addition, you may want to ask about penalties for late payments and under what conditions the lender can consider you in default and demand immediate full payment.

2.7 What are the continuing costs?

In addition to upfront closing costs, some lenders require you to pay continuing fees throughout the life of the loan. These may include an annual membership or participation fee, which is due whether or not you use the account, and/or a transaction fee, which is charged each time you borrow money. These fees add to the overall cost of the loan.
2.8 What are the repayment terms at the end of the loan?

Ask whether you might owe a large payment at the end of your loan term. If so, and you are not sure you will be able to afford the balloon payment, you may want to renegotiate your repayment terms. When you take out the loan, ask about the conditions for renewal of the plan or for refinancing the unpaid balance. Consider asking the lender to agree ahead of time and in writing to refinance any end-of-loan balance or extend your repayment time, if necessary.

3. Home Equity Loan

3.1 What is a home equity loan?

A home equity loan gives you a fixed amount of money that you pay back over a specific time period. You make fixed payments every month that reduce the loan amount until it is paid off. A home equity loan requires you to begin making payments upon receiving the funds -- whether or not you have spent the money. Click here to apply online.

3.2 How much can I borrow?

For property values below $1,000,000.00 -- from $5,000.00 up to 80 percent of your home's value, less existing mortgages
For property values $1,000,000.00 and greater -- from $5,000.00 up to 70 percent of your home's value, less existing mortgages
For non-owner-occupied property valued below $1,000,000.00 -- from $5,000.00 up to 70 percent of the property's value, less any existing mortgages
For non-owner-occupied property valued $1,000,000.00 and greater -- from $5,000.00 up to 60 percent of the property's value, less any existing mortgages
3.3 Can I get a home equity loan for a rental or vacation property?

Yes. You can secure a loan with a one- to four-unit single-family dwelling that you own, but is not your principal residence. Click here to apply online.

4. Home Equity Loan Process

4.1 How do I apply?

apply online for a home equity line of credit, a home equity loan, or a rental or vacation property loan or line of credit.

4.3 How soon will I know if I've been approved for a home equity account?

our loan representative will contact you within 24 hours.

4.4 Does a home equity loan or line of credit constitute a lien on my home?

Yes.

4.5 What happens if I sell the house before the loan or line of credit is paid off?

You will need to pay any outstanding balance in full.

5. What is the difference between a Home Equity Line of Credit and a Home Equity Loan?

A Home Equity Line of Credit is a revolving line of credit that works like a credit card. You use the money as you need it, repay all or a portion of it and use it again as often as you’d like. You only pay interest on the amount you use, and the interest rate will fluctuate according to financial market conditions.
A Home Equity Loan works like a fixed-rate first mortgage in which all the funds are disbursed at closing and the loan is paid off in monthly installments.
Interest on both Home Equity Loans and Home Equity Lines of Credit may be tax-deductible. Consult with your tax advisor to see if you qualify.

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