Because of the many benefits, home equity loans have become one of the most popular sources of credit in recent years. In most cases, the interest paid on a home equity loan or line of credit is tax-deductible because they are considered second mortgages (consult your tax advisor to be sure this applies to you). Today’s financially smart homeowners are tapping their home equity to fund college tuition, pay for home improvements, weddings, dream vacations, and even to buy or refinance cars, boats and motor homes. They are not only paying less interest for borrowing money, but in most cases, the interest paid can be written off on their taxes.

As with any financial product, consumers should shop around for the best terms, rates and fees. The length of the loan and the interest rate will have a major impact on how much the loan will ultimately cost. Knowing the options available for home equity loans will make this job easier. The first thing to determine when choosing a home equity loan is whether a term (closed end) loan or a home equity line of credit (open-ended) is best for your needs.

Fixed Term and Rate

A term home equity loan is a one-time lump sum loan amount that is repaid over a specific amount of time (typically 5 to 10 years) usually with an interest rate and payments fixed for the term of the loan. Typically, fixed term home equity loans apply to your situation if:

•You have a clear idea of how much you need to borrow to achieve a few specific and immediate finan- cial goals and you don’t anticipate the need for future loan advances.

•Your main purpose for borrowing is to consolidate credit card debts into a single payment and save money in interest over the long term.

•You prefer the security of a fixed interest rate and a monthly payment that will remain the same for the life of your loan.

Open End Line-Of-Credit

A home equity line of credit (HELOC) is very different. Your pre-approved credit limit can be accessed all at once, or in several smaller advances during the life of the loan. HELOC’s, in most cases, feature variable interest rates. Best of all, as you pay down the principal balance of your HELOC, the funds typically become available to you again - without having to apply for a new loan. Choose a HELOC if:

•You don’t need funds immediately, but you would like to establish easy access to credit for various “high-ticket” expenses over a staggered time period.

•You don’t mind interest rates and monthly payments that are subject to fluctuate periodically.

•You prefer to be able to take multiple loan advances as needed, and you plan to repay the funds in a reasonably short amount of time.

Consider your Credit Union for a Home Equity Loan

Could you use a little help sorting out the details and choosing the home equity loan that will best meet
your goals and needs? Wondering how much of your home’s equity you can borrow? Talk to the loan experts at your Credit Union. In addition to offering competitive rates, we take pride in delivering personalized service. We’d be happy to sit down and discuss your unique needs.