Benchmark Federal Credit Union’s new Ultimate HELOC features a low introductory rate of only 1.99% APR* for the first six months. This not only provides borrowers with a low-interest rate and affordable way to borrow, but also two possible payment options to fit individual needs and budgets. For specifics about the Ultimate HELOC visit Benchmark’s website.
A HELOC is an ideal, low-interest option for many borrowing needs from educational, medical, and emergency expenses to major life events and home improvement projects.
Benchmark’s Interest Only Ultimate HELOC features a 5-year draw period, which then reverts to a 15-year principal and interest repayment term. This revolving credit option offers borrowers the option to pay only the interest due monthly, with a minimum of $50 due each month. Once the total principal has been drawn a borrower can make principal payments in addition to the interest payments; if they wish and continue to draw on the available principal during the 5-year draw period. If they prefer the interest-only payments, they would stop drawing once they’ve reached their principal limit. Once the 5-year draw period ends a 15-year repayment period begins with both principal and interest payments required.
Principal & Interest HELOC
Benchmark’s Principal & Interest Ultimate HELOC features a 10-year draw period followed by a 15-year repayment term. This revolving credit option requires principal and interest payments each month based on the total amount drawn. As you pay down the principal amount you may continue to borrow up to the loan limit throughout your 10-year draw period. Your monthly payment will change during that period each time you advance or borrow. Once the draw period ends, a 15-year repayment period will begin. During this, you will have one pre-set payment amount each month.
Which HELOC options is better for you
So which option is better for your needs, you may be wondering. To determine this, you should begin by evaluating your budget and determine how much you can afford to put toward loan repayment each month. If you have the extra monthly funds available in your budget to make larger payments now, then choosing the principal and interest option upfront is best for you. Unless you continue to max out your principal balance, this option will also help you to reduce the total amount owed on the principal by the time the repayment period begins. This, in turn, will leave you with lower monthly payments during the 15-year repayment period
If you find yourself with little left in your monthly budget now but expect to be in better financial shape in a few years, then the interest-only payment may be the best solution for you. For example, you may currently be using most of your excess funds to put your children through college, but know that will only last a few more years. During the draw period, if you only make the minimum payment or the interest-only payment, your monthly payment will remain low. Once that draw period ends and the repayment period begins, your required payments will include both principal and interest. Your loan balance will be amortized over the 15-year repayment period and a new monthly amount will be determined. It’s important to note that this new payment amount may be significantly higher than those interest-only payments you’ve been making. It’s best to be prepared for that. If you choose the interest-only option and your financial situation changes during the draw period, you can always make extra principal payments to help reduce your balance. If you don’t continue to draw on the amount you’ve paid, it will help you to reduce the dollar amount of your monthly payments during the repayment period.
We hope this helps you to better understand the difference between the interest-only option vs. the interest and principal payment options for HELOCs. Visit Benchmark online for complete details, full disclaimers, or to apply for an Ultimate HELOC.