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Home Equity Line of Credit Q&A

Q. What is the difference between a Home Equity Loan and a Home Equity Line of Credit (HELOC)?

A. Both types of loans utilize your home’s equity, in most cases, to file a 2nd lien on your home as collateral for the loan. The difference between the two is how the money is given to you. A true Home Equity Loan is a one-time disbursement of funds; whereas, a HELOC is a revolving line of credit. This means that you can advance the money, pay it back, and then use it again during the draw period of the loan.

Q. What can I use the HELOC for?

A. The sky is the limit! You can renovate your home, go on a dream vacation, pay for college tuition, pay for your kid’s braces, or any other surprises that may pop up!

Q. How long can I use the revolving line of credit?

A. The draw period of the loan is five (5) years. During this time, you can advance the available funds in your HELOC as needed. After five years, the outstanding balance converts to a five- or 10-year repayment plan. Contact one of our loan officers for more details.

Q. What will my payments be?

A. During the draw period of the loan, payments are based on either a $100 minimum payment or 1% of the outstanding principal balance, depending on the amount owed. For example, if you have a $20,000 line of credit with a $5,000 balance, your payment will be $100. If you have that same line of credit with $15,000 advanced, your payment will be $150. Once the loan goes into repayment, the balance owed will be divided into regular fixed monthly payments until the loan is paid off.

Q. What kind of rate will I get for a HELOC?

A. The Annual Percentage Rate (APR) for a HELOC is a variable rate during the draw period of the loan. The rate is based on your credit score and the loan-to-value ratio (LTV) and can be as low as 4.00%! Your lender will be more than happy to explain the details of your qualifying interest rate.

Q. What kind of fees will I be charged?

A. One of the many benefits to belonging to NCCU is our low fees! Our HELOCs do not have annual fees or closing costs like many other financial institutions do. We have a one-time $150 processing fee and that’s it! There are certain circumstances or large loan amounts that would require a third party service (appraisal, title policy, etc.) at an additional cost, but your lender will work with you to determine if that is necessary.

Q. What if I want a draw period longer than five years?

A. No problem! Your lender will review your loan at the end of five years to determine if you qualify for an additional five-year draw period. Before approval, however, updated credit reports, paystubs, tax returns, and so on, will be required. Talk to your lender for details!

Q. What is the minimum and maximum amount I can get?

A. The minimum amount for a HELOC is $10,000; the maximum amount is determined on a case-by-case basis depending on the amount you qualify for and the equity in your home. Your lender has the answers!

Q. How much of my home’s equity can I use?

A. Our HELOCs are priced for an 85% loan-to-value ratio (LTV). See your lender for details!

Q. What if I want to use the equity in one of my investment or rental properties?

A. Then you’re in luck! We can help you with that too. However, keep in mind that rates, LTV, and required documents will differ from those for an owner-occupied home. See your lender for details!