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Scoring with a Good HELOC Deal

June 23, 2020 | Modified: November 14, 2022

The first step in getting a good HELOC deal is knowing just what makes it a good deal. A HELOC, or Home Equity Line of Credit, is a second mortgage that gives you access to cash based on the equity in your home. The equity is simply the value of your home minus your mortgage or other liens. While your credit score is important when borrowing money, when it comes to a HELOC, your home is used as collateral. For this reason, the focus on credit score may not be as big as with other loans. Keep in mind, although it may not be as big, it is still important. Lenders always want to see a good credit history and ability to pay back a loan. HELOCs are variable rate loans, so they adjust with the market. Here are some important features to look for when searching for a good HELOC deal.

4 Features of a Good HELOC Deal

1. A low introductory APR.  A HELOC that features a low intro rate is a great bonus to a borrower. This is especially true if you are drawing on your line immediately. A low intro rate gives you a specific amount of time before it reverts to the regular HELOC rate. Any amount of time you can take advantage of lower interest is a plus. For example, Benchmark Federal Credit Union’s Ultimate HELOC features a 3.99% APR* introductory rate for the first 6 months.

2. A HELOC that enables you to borrow a higher percentage of your home’s equity. Different lenders have different rules when it comes to the amount of equity you can borrow. It can run anywhere from 75% to 90%. That can be an important factor if you are looking to borrow a higher amount of money. For example, if your home is worth $250,000 and you owe $150,000 on your mortgage, you have $100,000 equity in your home. Lender A may only allow you to borrow $75,000, while Lender B allows you to borrow $90,000. If you really need that extra $15,000 to complete your home remodel project or to pay other expenses, then Lender B’s HELOC deal may be a better fit for you.

3. Low or no fees. This is a biggie folks. You need to factor the fees into evaluating a HELOC deal. High fees and closing costs can quickly outweigh the benefits of a lower interest rate. Do your research and ask a lender about hidden fees, such as an Inactivity Fee, Appraisal Fee, or any 3rd party fees. Low fee HELOCs are out there, you just need to find them.

4. Flexible payment options. Some HELOCs offer the benefit of flexible repayment options. This might include the option of making interest-only payments during the draw period. This can be a great advantage to borrowers looking to make the lowest possible monthly payments. After the draw period, which can be a number of years, the payment would increase to principal and interest. You may also have the option to make principal and interest payments right from the start. As you pay down the principal, you can borrow against it again until your draw period is over. Some borrowers might prefer this form of repayment. Look for a HELOC with the flexibility and payment plan that works for you.

Benchmark FCUs Ultimate HELOC   

A Home Equity Line of Credit can be a valuable tool for homeowners looking to take advantage of the equity they’ve built in their homes. A HELOC can help you to fund home improvements, cover emergency expenses, or finance a major purchase. The Ultimate HELOC available at Benchmark Federal Credit Union checks all the boxes mentioned above; when it comes to features. From the low introductory interest rate to enabling members to borrow up to 90% of equity and providing the flexibility of two repayment options. Benchmark’s Ultimate HELOC also benefits borrowers with no inactivity or appraisal fees. Tap for details on Benchmark’s Ultimate HELOC.

Read our blog to learn more about the differences between HELOCs and Fixed Home Equity Loans or other HELOC and Home Equity topics.

 

*APR = Annual Percentage Rate. Rates are for qualified borrowers and are subject to change without notice. The introductory rate of 3.99% APR* is for the first 6 months. At the end of the introductory term, the rate reverts to rate according to credit score at the time off application: as low as Wall Street Journal Prime Rate – .51% for 80% LTV** and Wall Street Journal Prime Rate – .26% for 81-90% LTV**. The floor rate is 3.99% APR. $100 application fee for loans under $25,000. An early termination fee of $250 if HELOC is paid off and closed in the first 12 months.

 

 

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