What is home equity?
Home equity is the difference of the value of your home and how much you still owe on it, or in other words, the value minus any liens (like a mortgage). A Home Equity Loan lets you borrow money using the equity in your home as collateral. At Towpath Credit Union, have two home equity lending options: a Home Equity Line of Credit, or HELOC and a Home Equity Loan. (See below to learn the difference is.)
What can a Home Equity Loan be used for?
You can use a Home Equity Loan for anything! Common uses are for home remodeling, debt consolidation, and home or car repairs, but there is no restriction on what you can do with the funds (as long as it’s legal!).
What’s the difference between a Home Equity Loan and a HELOC?
A Home Equity Loan is a lump sum loan that’s given to you when you close your loan for you to do with as you’d like. Home Equity Loans have a fixed interest rate and fixed monthly payments, so your payment amount will be the same each month until the loan is paid in full.
Apply for a Home Equity Loan
A HELOC, or a home equity line of credit, is an open line of credit (similar to a credit card) with a spending limit. During a specific amount of time called a “draw period” or “advance period,” you can spend as much or as little as you’d like up to your credit limit. Your monthly payments vary depending on how much has been charged to the line, and the interest rate on a HELOC is variable and changes with prime rate. After the draw period ends, you enter the repayment period, where any remaining balance is reorganized into monthly payments based on the final balance until it’s paid in full. These repayment amounts can vary with the interest rate if it changes, but they are based on the final balance at the end of the draw period. Our draw period is 10 years and the minimum payment is 1% of the outstanding balance or $50.00, whichever is greater.1
Apply for a HELOC
Did you know...
- You can get pre-approved for a Home Equity Loan with no impact to your credit.2
- You can refinance an existing Home Equity Loan or second mortgage.
- Your loan doesn’t have to be the whole value of the equity in your home. The minimum line of credit at Towpath CU is $10,000.
- You can transfer funds from your HELOC to any account in your Towpath CU online banking.
- We offer free HELOC checks and no minimum amount for advances.
- We can lend up to 80%3 of the value of a Member’s home (minus any first mortgage balance) based on Member credit and property evaluation.
Our pre-approval process is easy. Our Members can submit their applications with no impact to their credit score2 to see if they can be pre-approved, and there is no fee to apply. Once pre-approved, a hard credit inquiry is conducted before we continue with the process and our low member closing costs fee is applied to applicable closing costs.
This is beneficial for our Members because using a soft credit pull to check the rates and terms a Member may qualify for protects them from an unnecessary credit hit if they decide not to continue the application or we cannot approve it.
Once we have all the information necessary, our Underwriting team will pre-approve a Home Equity Loan pending the valuation of the property, a title search to look for other potential liens on the property, and other property or applicant related information. Our Loan Officer will provide disclosure forms during this application process to inform our Members of the Home Equity Loan type they have applied for.
Our current loan rates can be viewed here.
*APR = Annual Percentage Rate. APR includes only the interest and no other costs. Refinance of existing Towpath CU loans subject to applicable fees, terms, and conditions. Variable rate HELOC floor rate is 3.50% APR and cannot exceed 18% APR or the maximum permitted by law, whichever is less. Typical minimum principal and interest payment on a home equity loan amount $25,000.00 at 6.95% APR for 60 month term is $494.44 without optional debt protection coverage. Monthly HELOC payments during the 10 year draw period are 1% of the outstanding loan balance, or $50.00, whichever is higher. Typical minimum principal and interest payment on HELOC during repayment period, with a balance of $25,000.00 at 7.75% APR over 180 months is $235.32 before optional products.
**The lender may pay some third party fees associated with a home equity loan or line of credit. The borrower agrees to reimburse the lender the actual amount of bona fide third party fees paid on the borrowers behalf, as permitted by applicable law, if the home equity loan is paid off within thirty six (36) months after consummation and/or the home equity line of credit paid and closed within 36 months of opening.
1 Under some circumstances, your payment will not cover the finance charges (interest) that accrue and “negative amortization” will occur. Negative amortization will increase the amount that you owe us and reduce the equity in your home.
2 Credit Score/Hard Inquiry disclosure: To check the rates and terms you may qualify for, we conduct a soft credit pull that does not affect your credit score. However, if you choose one of our offered loan terms and continue your application, we will request your full credit report which will be considered a hard credit pull and may affect your credit score.
3 Approved loan-to-value of any home equity loan or HELOC application is subject to member credit score, credit history, property value, and other qualifications as required by law and/or credit union policy.
Towpath Credit Union Institution NMLS #415981