Want steady, consistent payments on your home equity line of credit (HELOC)? Just convert all or part of your balance into a fixed-rate4!
Get predictable payments:
Choose how much of your balance you want to lock in, select a term (5, 10 or 15 years) and pay it off with even, easy monthly payments.
Whatever amount you lock in will stay at your fixed rate, no matter how much variable rates move.
Helpful Tip
You can lock in your rate up to five times during your draw period. Plus, as you pay down your balance, your funds become available again through your variable-rate HELOC.
Here’s an example: say you have a HELOC with a balance of $7,000 and a current variable rate of 5.25% APR. To get more predictable payments, you can lockall or part of it (minimum of $5,000) into a fixed-rate.
You choose to lock $6,000 of that balance into a 5-year fixed-rate home equity loan with a rate of 5.49% APR5. To pay off that balance in exactly 5 years, you’ll pay $115 per month. The interest rate and your payments will stay the same for your entire term.
The $1,000 of your balance that you didn’t convert will still be subject to changes in your variable rate, and so will any other advances you make on your HELOC.
When you take out a home equity loan, the interest rate is fixed, and you get the money in one lump sum. Your payments remain the same, and your rates won’t change over the term of the loan.
In contrast, a home equity line of credit (HELOC) typically has a variable interest rate—although UW Credit Union offers the option to lock in at low fixed rate. Also, a HELOC allows you to withdraw funds when you need them, up to your credit limit, during the term of the loan. For more details, check outthis article.
There are a couple ways we obtain a value for your home for the purposes of a home equity line of credit.
An electronic report called an Automated Valuation Model
An appraisal ordered by UW Credit Union (an additional cost applies)
The valuation option used depends on multiple criteria and is dependent on your request and personal situation. In most cases, an appraisal is not required.
You can use your home equity loan or home equity line of credit (HELOC) for just about anything. Popular uses include home improvements, college tuition, vehicle purchase and debt consolidation. People often turn to home equity for big milestones and life events, such as a wedding, education, moving costs, vacation, adoption or fertility treatment or other medical expenses.
Whatever your plans, home equity can provide the funds to make it happen. Maybe you want to use a low-rate HELOC to pay off higher rate debt, such as credit card balances or Parent PLUS loans. You might simply want to open a HELOC for emergency expenses and peace of mind, so you have fast access to cash if the roof leaks or the car breaks. The options are nearly endless.
As with all lending products, you'll want to act responsibly: only borrow what you really need and don't borrow more than you can afford to pay back.
You can access you home equity almost anytime. You may be able to borrow up to 100% of your equity, so even if you don't have a substantial amount of equity built up, you may still be able to take advantage of this great lending option.
Home equity loans and lines of credit are secured against the value of your home, which means if you don't make payments you can face serious consequences such as foreclosure and credit damage - the same as if you don't make your mortgage payments.
However, when you borrow from your home equity responsibly, you can benefit from lower rates and more favorable terms than other loan types, in addition to potential tax advantages. Home equity can be a great way to fund big plans, especially home improvement projects that add value to your home and enhance your quality of life.
The bottom line is to approach home equity loans and lines as you would any other type of lending product: you should have a reason for borrowing and a plan for how you'll pay it off.
Our lending experts can review your situation and help you decide what's best for your needs, budget and goals. Request a call to get started.
Like any loan or line of credit, making regular on-time payments helps your credit score. Missing or late payments will lower your score. When you apply for a home equity loan or line, we'll perform a hard credit pull, which is standard practice for all loan applications and may temporarily lower your score by a few points.
If you're applying for a mortgage at the same time, we may be able to perform just one pull for both your home loan and home equity. Ask your mortgage loan officer for more details.
One feature to keep in mind is that while a home equity line of credit (HELOC) is technically a revolving line of credit, it usually isn't classified as such in your credit report and therefore shouldn't affect your credit utilization ratio. (This ratio reflects how much of your available credit you use and is an important factor in determining your credit score.) This is good news - it means if you borrow 100% of your home equity with a HELOC, it shouldn't negatively impact your credit utilization ratio.
Learn more about credit scores and how to improve yours.
