A home equity line of credit, or HELOC, enables homeowners to borrow against the current equity in their house. As a revolving variable rate line of credit, a HELOC lets homeowners borrow money as they need it, up to their limit, with flexible repayment terms.
The Benefits of a Home Equity Line of Credit
Borrowing flexibility
This is the biggest benefit of a HELOC over fixed rate loan products like personal loans or home equity loans. Similar to a credit card, with HELOCs, homeowners get credit limits against which they can borrow any amount at any time. HELOCs are a “revolving” type of credit, which means homeowners have the flexibility to borrow money from their line, pay it back, and repeat as needs arise.
Generally, a homeowner’s borrowing limit can be about 65-85% of the equity in their home, minus any other outstanding loans against it, such as a primary mortgage.
Spending flexibility
A homeowner can use the money from a home equity line of credit for most purposes. Common uses include home repairs and remodeling, college tuition and debt consolidation.
Low or no closing costs
Home equity lines of credit may have low closing costs or even none at all.
Low interest rates
Because they are secured by your home equity, HELOCs tend to have lower rates than unsecured loans like credit cards or personal loans.
Interest compounds only on amount used
If a homeowner takes out a fixed-rate loan, they pay interest on the entire lump sum they receive from the first day of the loan, whether or not they use it all right away. With a home equity line of credit, homeowners pay interest only on the amount they draw and only from the date the funds are withdrawn.
No cash withdrawal fees
Most lenders do not charge fees for drawing cash from a HELOC, unlike the fees usually charged by credit card companies for cash advances.
Repayment options
Repayment options are flexible with a home equity line of credit. This type of loan may allow an initial period of interest-only payments, the ability to convert some of the adjustable-rate loan to a fixed rate for more stable repayment terms, or the option to refinance into a new HELOC.
Common Uses for a HELOC
Funds from a home equity line of credit can be used for any purpose, but most borrowers use them to pay for major expenses or debt consolidation.
A HELOC can be an excellent, low-cost source of funding for major home repairs or for renovations — updating, adding a room, a pool or a deck, new appliances, etc. They can also fund major non-home-related expenses such as weddings or college tuition.
A HELOC can also be a useful option for paying down high-interest debt because of the low interest rates offered by this secured loan. Paying down high-interest loans with a lower-interest loan can help homeowners save money and and potentially get out of debt sooner. It can also simplify their finances by consolidating multiple payments per month into just one.
Bethpage Federal Credit Union Home Equity Line of Credit
A Bethpage HELOC allows members to borrow against the equity in their homes with a flexible revolving credit line, while still having the stability that comes with the fixed interest rate of a traditional home equity loan.
A Bethpage HELOC provides members with:
- No application or appraisal fees.[3]
- The flexibility to use their available line of credit as needed during a 10-year draw period.[2]
- The option to maintain all or some of their balance at a variable rate and make interest-only payments during the 10-year draw period.[2]
- The option to convert some or all of a variable-rate HELOC to a Fixed-Rate Loan Option (FRLO).[1]
We make it simple to apply for a Bethpage HELOC. Why not explore this flexible, low-cost loan option today?
Bethpage does not provide tax, legal or investing advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or investing advice. You should consult your own tax, legal and financial advisor before engaging in any transaction.
Rates and terms are subject to change without notice. All offers of credit are subject to credit approval requirements and applicants may be offered credit at higher rates and other terms. Loan-to-Value (LTV) and/or Combined LTV (CLTV) restrictions apply. Hazard insurance is required on all loans secured by real property (flood insurance may also be required where applicable). Consult a tax professional regarding the potential deductibility of interest. Bethpage does not currently offer HELOCs in Texas. Membership at Bethpage is required by opening a minimum $5 share savings account at or prior to HELOC account opening.
[1] A Fixed-Rate Loan Option (FRLO) allows you to convert an outstanding variable rate HELOC balance(s) to a fixed rate loan(s), which results in fixed monthly principal and interest payments at a fixed interest rate. A FRLO is optional and is available at the time of disbursement (account opening), or during the 10-year Draw Period. Borrowers may only have a maximum of three (3) FRLOs open at any one time. The minimum amount for each FRLO is $10,000. The minimum loan term is 5-years, and the maximum term cannot exceed the account maturity date. If you choose to convert any portion of your balance to a FRLO, the APR will be the U.S. Prime Rate as published in the Wall Street Journal that is in effect at the date of conversion, plus a margin. The margin applied will be based on your credit history, CLTV ratio, and lien position at the time of application and the term selected for the FRLO. Rates for a FRLO are typically higher than the variable rates on the HELOC account.
Interest-only payments apply to the variable rate line in use only and is not applicable to any Fixed-Rate Loan Option.
[2] The standard APR is variable based on the U.S. Prime Rate as published in the Wall Street Journal, plus a margin (if applicable) and is subject to increase after consummation. The current standard APR is as low as 7.50% as of –/–/–. Not all applicants will qualify for the lowest rate and may be offered credit at higher rates and other terms based on creditworthiness. The minimum floor APR is 3.25%. HELOC rates may not exceed the maximum legal limit for Federal credit unions (currently 18%). The Prime Rate as of –/–/– = 7.50%. Rates shown are based on a borrower’s primary residence, a maximum CLTV of 65%, a minimum initial draw of $25,000 taken at HELOC account opening, and automatic transfers from a Bethpage personal savings or checking account. For Closing costs, see below[3] .
[3] Closing costs for the first $500,000 will be paid by Bethpage but must be repaid by the borrower(s) if the HELOC is closed within first 36 months of account opening. These fees generally range between $500.00 and $15,000.00 depending on the line amount, property value, location, and/or property type. Line amounts over $500,000 may be available on a case-by-case basis to qualified applicants, are not eligible for the discounted introductory rate at any time, and the borrower(s) will be responsible for mortgage-related taxes and title insurance costs on the line amount over $500,000 (up to the approved credit limit). The total third party fees generally range between $500.00 and $60,000.00 depending on the line amount, property value, location, and/or property type. Property insurance (including flood insurance, if applicable) is required.
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