Home Equity
Make Your Equity Work For You!
Home equity is the amount of value that your home has beyond the amount you owe on your mortgage. This value is built up through a combination of your initial down payment and your mortgage payments, which go towards reducing the principal balance. In addition, if the value of your home increases over time, you may see an increase in your home equity.
One way to access your home equity is through a home equity loan or a home equity line of credit (HELOC). These types of loans allow you to borrow against the value of your home, using your equity as collateral. This can be a cost-effective alternative to using high-interest credit cards or personal loans. However, it's important to keep in mind that your home is at risk if you're unable to repay the loan.
Home Equity Loans
A home equity loan allows you to borrow against the equity in your home to receive a lump sum loan. Using a home equity loan, you may be able to:
- Obtain a fixed interest rate so you can always plan your monthly payment.
- Pay back your loan with favorable terms and conditions based on a variety of amortization periods available.
- Viable solution for those with less than perfect credit.
- May be an ideal solution for single projects, like kitchen renovation.
- Interest paid on the loan may be tax deductible (but consult your tax advisor to be sure of your circumstances).
Home Equity Lines of Credit (HELOC)
HELOCs provide a flexible way to access funds as needed, unlike home equity loans which involve taking out a single lump sum loan. Similar to a credit card, a HELOC is a revolving line of credit. However, it usually offers lower interest rates because it is secured by your home equity. You can borrow funds up to a pre-determined limit, and the interest charged is based on the amount you borrow.
During the draw term, which typically lasts between 5 and 10 years, you can pay down your revolving credit line and then reuse it as needed. You'll only be charged interest on the amount you borrow during this time. When the draw term ends, you can either pay off the entire balance or make payments according to a predetermined schedule, while continuing to pay interest. It's also possible to refinance the equity line for another draw term.
With a HELOC from Peoples Bank & Trust Company, you can:
- Set up emergency access to credit
- Buy a new car, truck, boat or RV
- Pay for college tuition
- Renovate your home
- Consolidate your bills
The benefits of HELOCs include:
- Flexibility — You choose how much to borrow and how to use it.
- Customization — You can choose whether your HELOC will carry an adjustable or fixed interest rate.
- Accessibility — You can get funds through withdrawals by way of checks or card use.
- Convenience — HELOCs close easily and do not carry closing costs or appraisal fees.
- Deductions — Interest on HELOCs may be tax deductible. Consult your tax advisor.
A home appraisal may be required to obtain a HELOC
Contact a licensed loan officer with Peoples Bank & Trust Company today to learn more about how home equity solutions can help you.
