What is Home Equity?
How does a HELOC Work?
Is a HELOC a Good Option for You?
Optimizing your HELOC experience
Why choose Advia Credit Union for your HELOC?
Life can be full of unexpected expenses. Whether it's footing the bill for a wedding or handling home repairs like a burst pipe flooding your basement, financial challenges can arise unexpectedly. At Advia we encourage you to view your home not just as a place to live, but also as an asset you can make work for you.
What is Home Equity?
Before we dive into whether a Home Equity Line of Credit, or HELOC, is right for you, let's understand what exactly home equity means.
“Think of home equity as the portion of your home that you truly own, the difference between your home's market value, and what you still owe on your mortgage,” says Carley B., Advia’s Manager of Consumer Loan Processing. “As you make mortgage payments and your property's value increases, your equity grows. This growing asset can be a handy resource to borrow against for your financial needs.”
In other words, leveraging your home equity can provide a flexible financial solution when you need it.
How does a HELOC work?
Now that we've discussed what home equity means, let's dive further into how HELOCs work.
A HELOC is not just a loan, Carley explains; it's a flexible financial resource that allows homeowners to leverage the equity in their homes. Unlike a traditional loan that provides a lump sum of money upfront, a HELOC operates more like a revolving line of credit.
During the "draw period," which typically lasts around 5-10 years - Advia offers 10-year repayment terms - you can withdraw funds as needed and only pay interest on the amount you borrow. After the draw period ends, you enter the "repayment period," where you pay off the principal and interest over the remaining term. With a HELOC, you only pay interest on the amount you borrow, not on the entire credit line available to you.
“HELOCs offer the flexibility to tap into your home equity gradually, paying interest only on what you use. It's a smart way to finance home improvements or manage unexpected costs without taking on unnecessary debt,” says Carley.
Ways a HELOC may be for you
Thinking about a HELOC? Considering these factors can help you determine if it's the right financial tool for your needs:
- You're planning home renovations: If you're looking to update your home or make significant improvements, a HELOC can provide the funds you need with potentially lower interest rates than other borrowing options.
- You have education expenses: Whether you're paying for college tuition or funding your child's education, a HELOC can offer a flexible source of funds to cover these costs.
- Debt consolidation: If you have high-interest debt from credit cards or personal loans, consolidating them into a HELOC with a lower interest rate could save you money and simplify your finances.
- Emergency fund: Establishing a HELOC as an emergency fund can provide quick access to funds in case of unexpected expenses like medical bills or home repairs.
- Variable financial needs: If your financial needs vary over time and you prefer the flexibility to borrow funds as needed, a HELOC can be a great solution.
Optimizing your HELOC experience
While it's important to understand the potential risks associated with a HELOC, these can be effectively managed with careful planning and strategic financial decisions. By recognizing these considerations and taking a proactive approach, you can maximize the benefits of a HELOC and turn potential challenges into opportunities for financial growth. Here's a closer look at some key aspects and how to navigate them positively.
- Variable rates: While HELOCs often have variable interest rates, this feature can also work to your advantage in a low-interest-rate environment, potentially reducing your borrowing costs. Additionally, some HELOCs offer options to convert to a fixed rate, providing stability if needed.
- Risk of foreclosure: Using your home as collateral can be a serious commitment. However, this also means you can typically secure a lower interest rate compared to unsecured loans. By careful planning and budgeting, you can manage payments effectively and use the HELOC to your financial benefit.
- Overborrowing: The flexibility of a HELOC allows for prudent financial management. By borrowing only what you need and establishing a solid repayment plan, you can avoid financial strain and make the most of this financing tool.
- Fees and costs: While there may be fees associated with opening and maintaining a HELOC, understanding these costs upfront allows you to compare offers and select the most cost-effective option. Many lenders provide transparent information, enabling you to make an informed decision.
By being aware of these aspects and managing your HELOC wisely, you can leverage the benefits while mitigating potential risks.
Why choose Advia Credit Union for your HELOC?
When considering a HELOC, Advia stands out for our dedication to providing real advantages and financial expertise.
We offer a low introductory rate for financial flexibility, with a limited-time introductory APR for the first 18 months, followed by competitive rates.1 You'll benefit from low-to-no closing costs, an interest-only payment option for the first 10 years, and no annual or pre-payment fees.2 Additionally, interest on your HELOC may be tax deductible, providing potential savings.3 With a manageable 10-year repayment term, Advia ensures you have the tools and support needed to make the most of your home's equity while meeting your financial goals effectively.
Discover more about our HELOCS, or feel free to schedule an appointment with one of our financial experts to get started today.
- Introductory Annual Percentage Rate (APR) of 5.99% for the first 18 months is a promotional offer available for HELOC applications submitted between 11/1/2024 and 1/31/2025 that must close no later than 02/28/2025, based on the following qualifications: (1) minimum credit score of 680 at time of application, (2) combined Loan-to-Value (CLTV) of 70% or below, and (3) minimum line of $10,000 selected. Estimated monthly payment for a $10,000 HELOC during the introductory period for the following APR: 5.99% = $49.92 (interest only). Following the promotional period of 18 months, the APR will revert to a variable rate, which is 7.50% APR as of 11/01/2024, which may change quarterly based on an index of Prime Rate as stated in the Wall Street Journal as of the last business day of each quarter. A quarter is defined as a calendar quarter beginning January 1, April 1, July 1, and October 1. Your APR is equal to as low as the Prime index + or - a margin. An increase in the index will result in an increase to your APR (includes a lifetime interest rate cap of 8% over initial non-promotional loan rate). Variable rate tied to Prime Rate for both the draw and repayment periods; based on credit score of borrower(s) and CLTV of secured real estate at the time of application.
- No closing costs unless an appraisal is required for Home Equity Lines of Credit (HELOC).
- Consult a tax advisor regarding tax deductibility which is subject to change at any time.
Some products and services may vary based on geographical region. Offer and rates subject to change at any time. Rates and terms may vary based on creditworthiness of borrower and term of loan. Floor rates and restrictions apply. All loans subject to credit approval.