Home Equity
What is a Home Equity Loan?
Strictly speaking, any loan secured by the value of your home, minus outstanding
mortgage loan debt is a home equity loan. By using the equity in your home, you
may qualify for a sizable amount of credit, which is available to you to use when
and how you please at an interest rate that is relatively low.
Some people still think that the loan proceeds of a home equity loan must be used
to make improvements to the home. That is not true. The proceeds from a home equity
loan can be used any way you choose. Many members use the equity in their homes
as a source of funding for new car purchases, college tuition, and big ticket purchases.
And yes, many members do use the proceeds to remodel, redecorate or improve the
value of their real property in other ways.
To determine how much equity you have in your residence - take the home's appraised
or assessed value minus the unpaid first mortgage loan. We lend up to 100% of the
appraised or assessed equity in your home in two ways:
Closed-end fixed-rate Home Equity Loans
The loan proceeds are taken in a cash lump sum. You repay according to a fixed schedule.
Our closed-end home equity loans have flexible terms and we make these loans for
80 - 100% of the equity in your home. The minimum closed-end home equity loan amount
we recommended is $5,000.
Open-end variable rate line of credit Home Equity Loans
With the line of credit home equity loan you are approved for a revolving line of
credit in which your home serves as the collateral. You are approved for a specific
amount of credit - your credit limit. This is the maximum amount you can borrow
while you have the loan. We make line of credit loans up to 100% of equity. The
interest rate is variable and may be adjusted monthly. The rate moves in relationship
to the prime rate as published in the WALL STREET JOURNAL. The minimum line of credit
loan is $5,000.00 and the minimum advance is $500. Home Equity line of credit payments
are 2% of the outstanding balance or $30.00 whichever is greater (a balloon payment
may result at the end of the HELOC period).
Consult with your tax adviser regarding the deductibility of interest.
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