Tapping Into Your Home Equity
Home equity loans (HEL) and lines of credit (HELOC) are flexible financial tools to help you make the most of your home equity, so you can benefit from your investment.ï¿½ The interest rate is fixed and thus, so is the monthly payment, for the life of the loan.
Use your home’s equity as a low-interest way to:
- Pay for Home Improvements
- Consolidate Debt
- Buy a New Car or Pay off your Current auto loan
- Start your own Business
- Pay Medical Bills
- Pay for College
- Take a Vacation
- Purchase a Second Home
- Bonus – Many times interest paid is tax deductible (contact your tax advisor for details)
|Fixed Rate Loans||Reasons for Selecting||Key Benefits|
|Access Money||Borrow money as you need it up to the credit limit. Each time you pay principal it frees up that amount of your credit line for later use.||Borrow the entire loan amount at once.|
|Interest rate||Variable rate. Rate calculated on a margin and a prime rate.||Fixed rate. Payment stays the same for the entire term of the loan.|
|Payment||Varies monthly with rate and depends on how much you’ve borrowed against your credit line. During the five- or ten-year draw period, you have the flexibility to pay interest only. After the draw period, your principal and interest payment vary to pay off the loan in the remaining years.||Principal and interest payment remains the same over the life of the loan.|
|Loan Advances||Use your access checks to withdraw money up to your credit line amount.||No check-writing option. Entire loan amount received at closing.|
(Ask your tax advisor)
|Interest is up to 100% tax-deductible.||Interest is up to 100% tax-deductible.|
|Other advantages||Good safety net for unexpected expenses.||Excellent choice for one-time planned expenses or to consolidate debts.|
Home Equity is your home’s dollar value that you own outright. It is the difference between your home’s appraised value and the balance of your mortgage loan. For example, if your property is worth $300,000 and you have a mortgage for $100,000, your equity is $200,000.
What is loan-to-value ratio?
Loan-to-value ratio is the total of your mortgage loans divided by the appraised or tax-assessed value of your property being used as collateral. For example:
|Home Equity Loan Amount:||$140,000|
|Total Mortgage Loans||$240,000|
|Loan-to-Value Ratio:||$240,000/$300,000 or 80%|
How much can I borrow?
Primary Residential Mortgage, Inc. offers Home Equity Loans and Lines of Credit up to 100% of the appraised or tax-assessed value of your property. The minimum amount you may borrow is $10,000; the maximum amount is $250,000
What is a Home Equity Loan?
A Home Equity Loan is a loan that uses your home as collateral. A Home Equity Loan is best when: 1) you have a specific dollar amount you wish to borrow; 2) you want to know exactly what your monthly payments will be; and 3) you want to know when it will be paid off.
What is a Home Equity Line of Credit?
A Home Equity Line of Credit is a revolving line of credit that uses your home as collateral. A Home Equity Line of Credit is best when: 1) you don’t have a specific dollar amount you wish to borrow, and 2) you want a reusable source of cash.
Is the interest tax-deductible? *
In most cases, the interest is tax-deductible if the Home Equity Loan or Line of Credit amount doesn’t exceed $100,000 or a maximum loan-to-value ratio of 100%. Please consult your tax advisor for details about your specific situation.
What determines my interest rate?
The interest rate for both a Home Equity Loan and Line of Credit is determined by creditworthiness, loan term, and loan-to-value ratio. In most cases, the shorter the term and the lower the loan-to-value ratio, the lower your interest rate will be.
Is hazard insurance required?
Hazard insurance is required for both Home Equity Loans and Lines of Credit.
Is flood insurance required?
Flood insurance is required for all accounts located in a flood hazard area. If after you apply we determine flood insurance is necessary, we will notify you of this requirement.
After I’ve applied for a Home Equity product online, what happens next?
Your application is evaluated, your credit report will be reviewed and your income and property value will be verified. A Loan Officer will contact you to inform you of the status of your application and answer any of your questions.
Loan Closing and Funding
After I close, when do I receive my funds?
There is a three-day time period between the time you close and the time your funds can be released. This time period is known as the rescission period and is mandated by law. On the fourth business day following your closing, funds are available.
What documents will I have to sign?
Depending on which state you live in, the documents you are required to sign varies. In most cases you are asked to sign:
- A deed of trust or mortgage. This document pledges your home as collateral for the loan or line of credit.
- A loan note and disclosure. This is your promise to repay the loan or line of credit.
- A right to rescission form. This explains your right to cancel the loan or line of credit within three business days of signing the loan documents.
- An agreement to provide insurance. This document pledges your home is covered by hazard insurance.