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Wise Home Equity Planning

Posted by MoneyWisdom Newsletter on Jan 17, 2018 4:52:24 AM

Wise Home Equity Planning

For savvy borrowers, using home equity for specific purposes makes sense. Rates are lower than most other types of borrowing, because the line of credit is secured by your home. Many homeowners also lower their tax bills, since the interest on home equity is often tax deductible.

The most popular reasons homeowners tap their equity is for home improvement projects, debt consolidation, and to cover college tuition.

If you are dealing with any of these scenarios, you’ll want to learn everything you can about home equity borrowing. Here are two of the most common questions we get.

How long does it take to process a home equity line of credit?

When you take out a home equity line of credit, you also go through a closing process similar to when you got your mortgage. Thankfully, it’s typically not as complex. Normal processing time is two to four weeks.

When we receive your application, a loan underwriter reviews your financial profile and compares it to the loan requirements. The underwriter has special training and experience to verify that the line of credit is within reach financially for you and safe for the credit union.

Next, it’s time to take a look at your property. Our goal is to get the most accurate value possible. This is a crucial step, because it can affect your rate and how much you can borrow.

A title agent helps ensure the home does not have existing liens or debts that could affect the property value. Finally, home equity specialists at the credit union prepare the documents for you to sign.

Throughout, we depend on you to supply documents and information. Having this documentation organized and ready at the beginning of the application process can help simplify the process which in turn can lead to a faster turnaround time.

Do I need an appraisal?

The answer is yes ... and no. In order to determine the amount you can borrow, we have to know the value of your property. But most of the time, a full appraisal is not required for a home equity.

We often can get an accurate valuation of a home through an automated valuation based on public records about your home. Other times, a simple drive by from an appraiser will suffice. As long as the public record data on your home is accurate, these types of appraisals are quite accurate.

An accurate, updated appraisal 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.

Our home equity experts can help you understand the appraisal process. Plus, you won’t pay an appraisal fee, or any closing costs, with Hanscom FCU’s 3 in 1 Advantage Plan.*

* If you terminate your line within the first 24 months after closing, you will be responsible for closing costs. 

Be PREPARED
Learn more about home equity by downloading our free Equity Edge eGuide. You’ll get the tools you need to thoughtfully use your hard-earned home equity. Learn more at https://go.hfcu.org/equity-edge.

Topics: Home Equity, Money Management

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