TURN YOUR HOME’S EQUITY INTO CASH!
Make Your Home Work for You!
The past few years have brought unprecedented challenges to the forefront of everyone’s lives. 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.
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. Turn your home’s equity into cash with a lump sum stable, fixed-rate loan or a convenient home equity line of credit.
Consolidate debt and save, or finance needs such as:
- Auto repairs
- Home remodeling/repairs
- Medical bills
- Travel
- Tuition
- A wedding or other milestone events
What’s the difference?
A home equity loan is a fixed-rate loan that enables you to take out a lump sum of cash, secured by the equity you have in your property. Borrow up to 80% of your home’s value. You pay back the loan, plus interest, in predictable monthly payments over a predetermined length of time.
A home equity line of credit (HELOC) is an adjustable-rate line of credit secured by the equity in your home. HELOCs have a variable-interest rate and work like a credit card: you get a certain credit limit and can draw from that, make payments, and draw again as needed. You can link your HELOC to your checking account for easy transfers back and forth. Use your line of credit as needed for projects, repairs, bills, or any need you may have.
Choosing Between a Home Equity Loan and a HELOC
The biggest difference between a Home Equity Loan and a HELOC is how you access your home equity and how monthly payments are calculated.
Home Equity Loan
Receive the total equity you borrow in a bulk, upfront payment with a fixed-interest rate. Make monthly payments for a set number of years until the loan is paid off.
- This might be your best choice when you know how much you need and have one large expense to finance right now. A Home Equity Loan can be helpful with:
- Financing one large project, such as a complete kitchen renovation or home addition
- Consolidation of higher interest debt
- Large expenses such as college tuition or launching a business
- Buying an investment property or second/vacation home
HELOC
Access your equity through a credit limit on a revolving credit line. Borrow what you need, when you need it, and make monthly payments that can fluctuate depending on how much you borrow and how the interest rate fluctuates.
- 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. The flexibility of a HELOC may be best for:
- Relatively small home-related purchases, such as new appliances
- Debt consolidation (credit card balances and anything else with a higher interest rate)
- Multiple smaller projects, such as renovating a bathroom and/or other improvements you plan to do over time and without knowing the total amount you’ll need.
- Using as a financial cushion or emergency fund
- Financing a new business or side hustle, such as house flipping
What is the application process like?
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).
When do payments begin?
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).
Use our loan calculator to explore various loan amounts, home values, and monthly payments. <Link to lapfcu.mortgagewebcenter.com/CheckRates>
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. Link to <lapfcu.org/home-equity-products>