Home Equity Financing

Is using home equity financing an option for you?

Have you ever been curious what a HELOC or home equity loan is or how they work?
It’s easier to understand than you might think.

First, let’s understand what home equity financing is?

If you own or are making payments on your home (as opposed to being a renter), the home is likely worth more than what you owe, plus your home has likely been increasing in value. For example, you might have a home worth $350,000 today, that you paid $250,000 for 5-10 years ago. That means you would have at least $100,000 in equity in your home. Most financial institutions let you borrow against 80 percent of that equity, but Capital Credit Union also has options to borrow up to 90 percent. So, in this example, as much as $90,000.

What can I use home equity funds for?

Many people use it consolidate their credit card debt, car loan and other loans into a single loan. The major advantages of this financing option can be an overall lower interest rate and a single, lower payment since the loan can be stretched over 10 or 15 years. They are also very popular for home improvement projects such as adding a garage, redoing a kitchen, adding a bathroom, finishing a basement, or completing landscaping. Some other popular uses are to pay college tuition or an elective surgery, or to help purchase a rental property, but, it can really be used for anything!

Does my home mortgage have to be at Capital Credit Union for me to get home equity financing there?

No. We simply use tax records or an accurate home appraisal, along with home loan balance information, to determine how much you’re able to borrow.

What is a HELOC?

A HELOC, or home equity line of credit, is a very popular kind of home equity financing. This enables a borrower to get preapproved for a maximum amount, $75,000 for example (although, they can be larger or smaller than that) and then “borrow as they go.” This insures they are only paying interest on the balance they’ve drawn. So, for example, if the money was being used to pay for a garage edition that was $25,000, a kitchen update that was $25,000 and adding a bathroom for $25,000, you would be able to draw on the funds as you need them and as projects progress, only paying interest on the amount you’ve drawn. You can continue to borrow, pay down, and borrow some more, not exceeding your maximum amount and not exceeding the time period over which you may draw the funds (5 years, for example).

What is a Home Equity Loan?

Unlike a HELOC, with a home equity loan you are borrowing the entire amount up front and paying interest on the entire balance.

How common is home equity financing?

It is quite common! About one-in-four homeowners have some type of home equity financing solution.

Is getting home equity financing complicated?

Borrowers are often surprised how fast and easy it is. The process can begin with getting your application started using our simple 7-question Snap form. Usually, within one business day after receiving that, the application is reviewed. Then, if approved, funding can be obtained in as quick as 7 days.

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