1. What’s my rate?
This is, by far, the most frequently asked question of our loan officers about home equity lines of credit, or HELOCs for short.
Two things determine the rate you pay for a HELOC. The first thing you have no control over. The second thing, you have total control over.
1. The Prime Rate:
Our rate is based on the Wall Street Journal Prime Rate. We review it monthly and usually set it at the beginning of the month. Although you have no control over this rate, you can keep your eye on it so that you can apply when the rate is down. Keep in mind that with a line of credit, your rate will fluctuate.
2. Your Credit Score:
Your credit score is something you can control. The better your credit, the lower the rate you will pay. The rates you see advertised at any financial institution are always for members with the best credit profiles. Even a small increase in your credit score can save you big bucks over the life of a loan.
2. What are your closing costs?
Closing costs are part of the costs of setting up a HELOC. They are similar in nature to those you pay when you get a mortgage. But with Hanscom FCU, there are no application fees or closing costs on a HELOC provided a discharge is not requested within 24 months of closing. The member must reimburse Hanscom FCU for all closing costs if a discharge is requested within this timeframe.
Typically, these fees will range from 2 to 5% of the loan depending on your location, loan to value ratio, and local laws.
3. How long will it take to process the HELOC?
Normal processing time from application to closing for a HELOC is 2 - 4 weeks depending on the complexity of the loan request.
During the lending process, a loan underwriter will typically review your financial profile and compare it to the loan requirements. The process can also include verification of financial information, collection of documents to satisfy conditions of commitment, and a valuation of the property.
4. Do you require an appraisal for HELOCs?
We need to determine the value for any property for which a HELOC is requested. However, a full appraisal is not always required; we have a number of resources that can give us an accurate valuation of your home.
A valuation or appraisal protects both the borrower and the lender. By getting an accurate value of the equity in the home, it protects you from borrowing too much against the value of the home and risking getting into financial trouble. It likewise protects the membership of the credit union from loaning too much against the value of the home.
5. Is there a prepayment penalty on HELOCs?
A prepayment penalty is a provision of your contract with a lender that states that in the event you pay off the loan entirely at a point prior to the final maturity date, you will pay a penalty. Penalties can be expressed as a percent of the outstanding balance at time of prepayment, or a specified number of months of interest.
At Hanscom FCU, there are no prepayment penalties for HELOCs. However, if a discharge of the loan is requested within 24 months of closing, the member must reimburse Hanscom FCU for all closing costs, even if they sell their house.
A HELOC allows you to access cash as the need arises. These loans typically have a variable rate. As you pay down the principal with monthly payments, those funds become available again. You would use this option if you need money spread out over intervals for expenses like medical bills, college tuition, or home improvements that you intend to do in stages.