Home Equity Loans and Lines of Credit
Home Equity Loans and Lines of Credit
Your home's equity could be working harder for you.
Leveraging the equity in your home is a great way to borrow money at a secure, low rate. A Home Equity Loan or Home Equity Line of Credit (HELOC) can help you pay for any number of large purchases or projects. From higher education tuition costs to home improvement to unexpected medical expenses, these lending products can give you the financial breathing room you need.
Home Equity Loan
Lock in a fixed rate to finance whatever life may bring. With a HELoan1, you can borrow against your home equity, receive the full amount upfront, and pay it back over time.
- Payments never increase with a fixed interest rate for the full loan term
- No or low closing costs, no application fee, and no annual fee
- First and second-lien options available
- Might be a good fit for you if you’re looking to borrow a large sum and pay it off over a period of time longer than 1-2 years
Home Equity Line of Credit (HELOC)
Get the funds you need without the burden of a high interest rate. With a HELOC2, you can borrow from your home equity as needed—up to a preset limit and with a low variable interest rate.
- Introductory rate as low as 7.75% APR for the first 12 months; as low as 8.75% APR thereafter.2
- No annual fees
- No or low closing costs and no application fee
- Finance up to 80% loan-to-value with a 10-year draw period and 15-year repayment period
- Might be a good fit for you if you’re looking to borrow money at a low rate and repay the amount quickly
HELoan vs. HELOC
| Features | Home Equity Loan1 | Home Equity Line of Credit2 |
|---|---|---|
|
Features
Adjustable interest rate
|
Home Equity Loan1
|
Home Equity Line of Credit2
X
|
|
Features
Fixed Interest rate
|
Home Equity Loan1
X
|
Home Equity Line of Credit2
|
|
Features
Receive lump sum
|
Home Equity Loan1
X
|
Home Equity Line of Credit2
|
|
Features
Draw money as needed
|
Home Equity Loan1
|
Home Equity Line of Credit2
X
|
|
Features
Pay interest only on the money used
|
Home Equity Loan1
|
Home Equity Line of Credit2
X
|
|
Features
No application fee
|
Home Equity Loan1
X
|
Home Equity Line of Credit2
X
|
|
Features
Low to no closing costs
|
Home Equity Loan1
X
|
Home Equity Line of Credit2
X
|
|
Features
No annual fee
|
Home Equity Loan1
X
|
Home Equity Line of Credit2
Fee can be avoided
|
How You Can Use Your Equity
Home Renovations
Consolidate Debt
Fund Education
Support Your Family
Make Large Purchases
Cover Unexpected Expenses
Connect with a lending specialist to get started.
Frequently Asked Questions
With a cash-out refinance, you can turn your home equity into cash for any purpose, not just home improvements. Common reasons for a cash-out refinance are consolidating higher-interest credit card debt at a lower interest rate and paying for higher education.
With a cash-out refinance, the amount of your loan and your monthly payments will go up, but the interest rate on the cash you take out may be lower than other alternatives.
To learn more, check out this article: How Does a Cash-Out Refi Work?
With a cash-out refinance, the amount of your loan and your monthly payments will go up, but the interest rate on the cash you take out may be lower than other alternatives.
To learn more, check out this article: How Does a Cash-Out Refi Work?
You don’t. There are two other options: a home equity loan (HELoan) and a home equity line of credit (HELOC).
A HELoan is a second mortgage that usually has a fixed interest rate and monthly payments of the same amount every month. A HELOC works more like a credit card, but the interest rate is typically lower than a credit card.
You have a maximum amount you can borrow as needed. HELOCs usually have a variable interest rate and monthly payments that may go up or down.
Take a closer look at the differences: Should You Consider a HELOC or HELoan?
A HELoan is a second mortgage that usually has a fixed interest rate and monthly payments of the same amount every month. A HELOC works more like a credit card, but the interest rate is typically lower than a credit card.
You have a maximum amount you can borrow as needed. HELOCs usually have a variable interest rate and monthly payments that may go up or down.
Take a closer look at the differences: Should You Consider a HELOC or HELoan?
Usually, people need equity equal to 15–20% of their home’s current appraised value to qualify for a HELOC. For example, if your home’s value is $300,000, you may be able to qualify for a HELOC with a credit line of $45,000–$60,000.
It usually takes anywhere from two to six weeks to get a HELOC approved and processed. If your financial situation is simple, you may be able to get a HELOC faster than someone whose situation is complex. Either way, you can help keep the process moving by responding to your lender’s requests for financial documentation as quickly as you can.
Yes. Like a second mortgage, a HELOC uses your home’s equity as collateral to secure the loans. The difference is that a HELOC gives you a line of credit instead of a lump sum of cash.
Yes. A lien is any debt on an asset that uses the asset as collateral. With a HELOC, your loan is the asset, but other assets like cars, trucks, boats and RVs can also have liens in the form of loans.
HELOCs are popular for making home improvements, but it’s a myth that improvements are the only thing you can use a HELOC for. You can use a HELOC for anything, including consolidating higher-interest debt, medical expenses, school tuition, investment in income properties and emergencies.
Yes. Depending on your lender, you can even use a HELOC on investment property. At United Community Bank, we do consider applications for HELOCs to cover a new home downpayment.
Yes, you usually do. A HELOC appraisal helps your lender determine how much your home is currently worth and calculate the amount of equity available accurately. Sometimes, a lender will make an exception if you already have a recent appraisal, or the amount you’re requesting is low.
HELOC repayment happens in two phases. First, you have a draw period. Second, you have a repayment period. During the draw period of the first five to 10 years, you may only have to make payments on interest, not on principle, too. During the repayment period, you’ll be required to make higher payments that include interest and principle.
Yes, but you may pay higher interest rates on your HELOC, and your lender choices may be limited. Another option is to consider a co-signer. Either way, you can take some steps to improve your credit score.
Check out these tips: Give Your Credit Score a Boost.
Check out these tips: Give Your Credit Score a Boost.
HELOC interest rates are the Annual Percentage Rate (APR) you’ll pay on what you withdraw from a HELOC, spread out over monthly payments. These rates vary by state and lender. Talk with your local United Community Bank lending specialist to get current rates.
When you pay off your HELOC, you’re freed from the monthly payments, and you get your home equity back, which you can access again in the future if needed. You also eliminate the risk of foreclosure that comes with a HELOC if you can’t make your monthly payments on time.
It can be, but there are pros and cons to consider. If you fund your child’s education with a HELOC, you’ll likely pay lower interest rates than on a Parent Plus loan. A federal student loan is another option that may have even lower rates than a HELOC and the benefit of not putting your home at risk if you’re unable to make your HELOC payments.
Resources to Help
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United Community Bank offers first-lien and second-lien amortizing fixed-rate Home Equity Loan (HELoan) products. The first-lien HELoan is available in amounts ranging from $10,000 to $75,000. The second-lien HELoan is available in amounts ranging from $10,000 to $1.5 million. HELoan products are available for consumer owner-occupied, single-family residences and are not available on manufactured homes. Closing costs vary by state and loan amount. Bank may choose to waive a portion of the closing costs. Borrower pays all costs pertaining to recording fees, tax monitoring fees and mortgage taxes. Bank must be in a valid first or second-lien position.
2 The Annual Percentage Rate, referred to as APR, is based on an index (WSJ Prime Rate) plus a margin. The discounted introductory APR is fixed for the initial 12-month period. Thereafter, the APR is variable and may change daily but will never exceed 16%. The margin for each loan is determined by credit qualifications, lien position, owner occupancy, loan-to-value (LTV) ratio and other loan features. The stated APRs represent borrowers with a minimum 760 credit score, owner-occupied first or second lien primary residence, maximum 80% LTV and 0.25% discount for auto-debit from a United checking account. Eligibility for introductory rate and reduced closing costs require a United Community Bank checking account and debit card. Closing costs vary by state and loan amount. For an average loan amount of $100,000, closing costs generally range from $288 to $844. Bank may choose to waive a portion of the closing costs. Borrower pays all costs pertaining to recording fees, tax monitoring fees and mortgage taxes. HELOC product is available only for consumer owner-occupied, single-family residences and is not available on manufactured homes or leasehold properties. Bank must be in a valid first- or second-lien position. Property insurance and flood insurance, if applicable, are required on all collateral. The HELOC has a 10-year draw period and 15-year repayment period. Exclusions and limitations apply. Offer subject to bank’s standard credit approval criteria and is subject to change without notice. Stated APRs are accurate as of 11/20/2023.
