Need to remodel your home, invest in education, or have another large purchase you’re looking to fund? A home equity line of credit, often referred to as a HELOC, offers a revolving line of credit based on the amount of equity in your house and it could be an attractive alternative to a personal loan.
"There are many choices people have when it comes to borrowing money, and we like to discuss them all with customers," said Tom Schubert, Merchants Bank—Rochester Northwest lender. "Some borrowers might find HELOCs offer some key advantages that make it the right choice for them."
Better Interest Rates
Because a HELOC is secured by your home’s equity, you can typically obtain a more competitive interest ratethan what’s offered on other types of credit lines. HELOC ratescurrently start at an introductory rate of 2.9% APR for the first six months and 4.50% APR after that.* Like any loan, that rate is based on the borrower’s credit history.
Not all borrowers are the same. We all have different financial needs at different times. A HELOC also isn’t a one size fits all approach. It gives you access to funds when you need it and for what you need. This also means you’re only paying interest when you’ve advanced funds and once you pay it off, you’ll still have access to it for the established time limit during the life of the loan.
Other loan products don’t offer the same convenience. A typical loan requires borrowers to pay monthly principal and interest payments for a set term until the loan balance is zero.
As a homeowner you know you may be able to deduct your mortgage interest during tax time and the same may also be true with a HELOC. Consult your tax advisor for information.
How Much Can You Borrow?
Your lender determines how much you qualify for based on the equity in your home, credit score and income. If you’re just curious, use an online HELOC calculatoror call your lender who can usually determine an approximate amount you may qualify for with just a short conversation.
When drawing from your HELOC, it’s important to have a plan for paying the money back in a timeframe that is reasonable given the purpose.
Choosing a Lender
Working with a lender who is readily available is an important consideration when looking for a HELOC. It is important to choose a local lender who is readily available should you have questions and who is willing to sit down with you to discuss your borrowing needs.
"We want people to be educated about their options and feel comfortable they’re making the right choice that will meet their needs now and in the future," said Dave Engstler, Merchants Bank—Rochester Green Meadows lender. "That means being available to answer any questions whether over the phone or in-person from day one and beyond."
How Can You Qualify?
If you own a home and have built up enough equity you may be able to open a HELOC.
To get started apply online, by phone with your lender, or in person.
* Subject to credit approval. As of October 31, 2019, the Annual Percentage Rate on a home equity line of credit with an 80% or less loan-to-value and a credit score greater than or equal to 700 was 4.50%. This special offer has fixed-rate pricing as low as 2.9% APR for the first six months, based on relationship reward discounts. Following that six-month period, the rate will become variable, subject to change, based on U.S. Bank, N.A., prime rate plus a margin that is determined based on the loan-to-value in your home and your credit score at the time of application. Current rates vary from 4.50% to 7.25% APR. Maximum possible APR is 18%. Minimum possible APR is 4.00% An origination fee may apply, in addition, you are responsible for certain fees to third parties, such as appraisers, credit reporting firms and government agencies, which are generally from $100–$1,000. Following the first year, there will be an annual fee of $25. Offer available on new home equity lines of $10,000 or more only or on existing lines of credit with an increase of at least $10,000. Consult your tax advisor regarding the deductibility of interest expense. Property insurance will be required. Limited time offer.
Merchants Bank is an Equal Housing Lender and Member FDIC.