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Why should I get a Home Equity Line-of-Credit?
If you plan to use the money periodically and not all at once, you may want to obtain a home equity line-of-credit. For example, if you’re doing a remodeling project and the contractor will be paid in several installments or you’ll be making tuition payments at the beginning of each semester. A home equity line-of-credit is a credit line much like a credit card, giving you the flexibility to borrow what you need when you need it.
- Competitive variable interest rates.‡
- Our Home Equity Gold line gives you the option to pay Interest Only for the first 10 years!
- Lines-of-Credit are available up to $250,000.
- Lines are available up to 90% CLTV.+
- Interest may be tax deductible!^
Don’t forget to protect your most valuable asset! TruStage® gives credit union members access to coverage underwritten by Liberty Mutual® Insurance Company - learn more!
At FedChoice we have several Home Equity products, one of which is our “Interest Only” Home Equity Gold product. When you consider a Home Equity Line, we want you to be able to make an informed decision. Take a few minutes to learn about our Home Equity Gold product.
During the first 10 years, when you can draw on your line-of-credit, your monthly payments will be “interest only.” What this means is that we will calculate the finance charge on the amount you used, and your required payment will only cover that finance charge (and any other late fees, etc., that might apply). Your required payment will not include a portion that pays down your principal. Interest only payments will normally give you a lower monthly payment and can provide you with more financial flexibility. That can be a real advantage to you! Of course, you always have the option to pay more than the required amount, and that portion will reduce your principal and help reduce your interest next month!
Like most Home Equity Lines, the interest rate on our Home Equity Gold is based on what is called an “index.” In our case, we use The Wall Street Journal Prime Rate as the index. Our Gold product changes on the first of each month based on what the WSJ Prime was 14 calendar days prior to the first of the month. If Prime Rate increases, your monthly interest payment will rise. On the other hand, as the Prime Rate decreases, your monthly interest payment will decrease!
After the 10 year draw period, you can no longer borrow on the line and it’s time to repay the balance on your line-of-credit. We give you up to 15 years to do that! We take your line balance at the end of the draw period and we calculate a monthly payment by multiplying it by 1.25%. That will be your monthly payment until the line is paid off. What you must remember is that your monthly payment will normally increase significantly during the repayment period. At FedChoice, we care about our members and don’t want to see them stretched beyond their means. One way we try to prevent that is when we originally approved your loan, we evaluated your ability to repay the full amount of the line at a payment that is 1.25% of the full balance.
Our Home Equity Gold is not for everyone, but as long as you understand the product structure and features, it may offer a great solution for your financial needs. If you have other questions about this product, we encourage you to contact us. We’ll be glad to answer any of your questions!
The Consumer Financial Protection Bureau has published an informative brochure to help you understand the differences between home equity loans and home equity lines-of-credit so that you may determine which product will best suit your needs. Click here.
* Rate for the Gold Home Equity Line-of-Credit is based on The Wall Street Journal Prime. Rate adjusted monthly. The Gold Home Equity Line-of-Credit is subject to a floor of 3.50% APR.
‡ Variable rate is based on The Wall Street Journal Prime. Rate adjusted monthly.
† The Smart Choice Home Equity Loan and the HELOC must be secured by the owner-occupied primary residence. Homeowner’s insurance is required. All loans are subject to credit approval.
^ Consult with your tax advisor regarding the deductibility of interest and charges. The interest on the portion of the loan that is greater than the fair market value of the dwelling is not tax deductible for Federal income tax purposes. Other conditions apply.
+ CLTV = Combined Loan to Value.