Monday, April 11, 2016
Spring cleaning: Home equity style
With the arrival of warmer weather, thoughts turn to spring cleaning and home-improvement projects.
If you’re looking to update your home, remember that your house can be a powerful financial asset.
Using a Dupaco Home Equity Loan to finance your project can leave you money ahead—providing significant interest savings compared to the terms of a personal loan or credit card.
“Most people come in looking for a personal loan or credit card to tackle their home-improvement projects,” says Cindy Hilkin, consumer lending consultant supervisor at Dupaco Community Credit Union. “But it’s important for them to know the benefits of a home equity loan.”
What is equity in a home?
Your home’s equity is the difference between the appraised value of your home and what you owe on your mortgage. Equity is the part of your home’s value that belongs to you, not your lender.
Want to know the equity in your home? Find out with Dupaco’s calculator.
When you take out a Home Equity Line of Credit, or HELOC, you’re borrowing against that equity.
How does a home equity loan work?
While home equity loans begin with the home, the funds drawn from them don’t need to be applied to the property. Many Dupaco members use them to help pay for a remodeling project, but others use them to consolidate outstanding debt, Hilkin says.
“Once we have a home equity line of credit on the books, it will sit there until you actually need to use it,” she says. “Oftentimes, our members will take out a bigger line of credit than they need, because they only pay back what they actually borrow.”
The HELOC can be accessed at any branch, over the phone or through Dupaco’s Shine Online Banking. The monthly payments—which are determined by the loan balance amortized over 180 months—begin when the line of credit is accessed. Members have the flexibility to pay more frequently, though.
When considering how much of the equity you’re going to access, always have an idea of how long you’re going to stay in your home, Hilkin advises.
Why is a HELOC loan a better value?
Borrowing against the equity in your home can net tax advantages if you qualify, because the interest paid on the loan is considered mortgage interest, which is tax-deductible.
HELOCs also offer a low repayment option at a favorable rate.
Plus, Dupaco pays $350 of the closing costs, which covers the majority of those expenses. And there are no annual or maintenance fees with Dupaco’s HELOC.
“We have plenty of members who sit with a home equity line of credit open with nothing being drawn from it,” Hilkin says. “It’s planning for the unexpected, and having that peace of mind is huge.”
By Emily Kittle