Whether you want to consolidate debt, need help making ends meet, or want to renovate your home, borrowing from the equity in your house is an affordable and flexible financing option. Plus, home values have risen in response to increased demand, so equity has increased, giving you more borrowing power.
A home equity loan or line of credit is a simple and smart way to save big when you have to pay for important expenses. Consolidate debt and save, or finance needs such as:
- Auto repairs
- Home remodeling/repairs
- Medical bills
- A wedding or other milestone events
A fixed-rate home-equity loan lets you take out a lump sum of cash. You can borrow up to 80% of your home’s value. You pay back the loan, plus interest, in predictable monthly payments for a set number of years until the loan is paid off.
- This might be your best choice if you know how much you need and have one large expense, such as:
- Financing a large project, such as a complete kitchen renovation or home addition
- Consolidating higher-interest debt
- Large expenses, such as college tuition or launching a business
- Buying an investment property or second/vacation home
- A HELOC is an adjustable-rate line of credit with a variable-interest rate. It works like a credit card: you get a certain credit limit and can borrow from that, make payments, and borrow again as needed. You can link your HELOC to your checking account for easy transfers back and forth.
- The flexibility of a HELOC is helpful when you don’t know how much you’ll need to borrow or when you want to finance multiple expenses over a period of time, such as:
- Relatively small home-related purchases, such as new appliances
- Debt consolidation (credit card balances and anything with a higher interest rate)
- Multiple smaller home improvement projects or projects you plan to do over time
- Use as a financial cushion or emergency fund
- Finance a new business or side hustle, such as house flipping
UNDERSTANDING THE LOAN APPLICATION PROCESS
Applying for a Home Equity Loan or HELOC is similar to the mortgage process. You will:
- Complete an application
- Consent to order of a title report and credit check
- Provide supporting documents as needed, such as proof of income
- Consent to a valuation of property value; an appraisal may be required to determine market value if the valuation system cannot render a value or if the loan amount is less than $250,000
- Sign closing documents once loan is approved
Your loan closes once the rescission period ends. If you are refinancing a mortgage, you have until midnight of the third business day after the transaction to cancel the mortgage contract. The right of rescission refers to the right of a consumer to cancel certain types of loans.
HOW DO PAYMENTS WORK?
For a Home Equity Loan: You’ll begin making monthly payments once the loan closes, and you may be able to take a tax deduction on the interest paid on your loan (consult a tax professional).
For a HELOC: No monthly payments will be due until you make your first draw on the account. You may be able to take a tax deduction on the interest paid on your loan (consult a tax professional).
Find out how a home equity loan or HELOC can benefit you and lock in a great rate today. Speak with an LAPFCU loan specialist today at (877) 695-2732, ext. 7777.