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If you’re a homeowner with a mortgaged house, odds are you’ve availed a Home Equity Line of Credit (HELOC) at some point in your mortgage’s life. Maybe, you have used it to pay for your child’s university education. Or perhaps, you got one to make your dream trip come true.
Most HELOCs offer a draw period where you need to pay for interests alone—and that’s easy.
The financial jolt for most borrowers happens when it’s time to pay for the principal loan balance. But, don’t despair.
The good news is you can address these financial setbacks through home equity refinancing. Here are the benefits of refinancing your HELOC.
1.Start things right,again
Refinancing your HELOC may mean starting fresh with a new draw period and another set of interest rates. In other words, you are given another chance to start things right with lower monthly payments.
GAFCU currently offers its HELOC at a twenty-year term. This should give you enough time to recover from your financial situation.
Depending on your approved home equity refinancing line of credit, you may get a seven-year draw period for your twenty-year loan.
The interest rates can vary. To give you an estimate, the rate for an 80% HELOC starts at approximately 2.99% APR*.
2. Get an extensive Credit Line for Major Expenses
Life happens when we least expect it. When you need a fund to cover major life expenses, you can use your house to avail of an extensive credit line.
HELOCs work like credit cards where they give you some sort of a credit line.
Depending on the initial assessment, you can get as much as 80% of your home equity. That means if your current home has an appraised value of $300,000 and you have an unpaid mortgage of $100,000, you can get up to $160,000 as your credit line.
However, please note that GAFCU currently approves HELOC up to $250,000 only. Nevertheless, this type of home equity credit can go a long way.
3.Use 100% of the Appraised Value of Your Home Equity
Traditionally, GAFCU approves HELOCs to as much as 80% of the appraised value of the collateral (with a $250,000 limit as discussed above). However, we make exceptions to that, which means you may also qualify for a 100% HELOC.
Like the usual set-up for an 80% line of credit, a full HELOC also includes a twenty-year loan term.
As for the interest rate, a 100% HELOC may start at 4.49% APR**. The rate is substantially higher than the usual interest costs because the credit union assumes full risks of the loan.
4.Get a Cash Back out of Your Loan
Aside from flexible payment terms, another benefit of home equity refinancing is getting a cashback. Imagine earning some pocket money from your loan!
GAFCU currently gives 1% of the loan amount for every HELOC that you bring in from another financial institution for home equity refinancing. The amount of cashback you get is, however, limited to $1,000 only.
5.Don’t worry about Minimum Draws
One of the advantages of getting a HELOC is the ability to obtain a high credit line while at the same time, having the freedom to take control of your debt.
Some home equity refinancing policies, however, may entail a minimum draw policy on your loan, which typically averages from $10,000 to $25,000.
In other words, you have to withdraw a thousand dollars, whether you like it or not.
We understand the weight of a minimum draw on your shoulders. Hence, at GAFCU, rest assured that we will not require a minimum draw so you can fully enjoy your home equity loan benefits.
6.No need to pay Application and Appraisal Charges
Many borrowers hesitate to shop around for home equity refinancing loans, such as HELOCs, because of application fees and appraisal charges that a loan may entail.
But, not anymore.
GAFCU is not charging you anything for application and appraisal charges. We will not even ask for an annual fee when you’re refinancing a HELOC with us.
So, you can have peace of mind when looking for the best rates and terms in town.
7.Enjoy Financial Freedom without having to worry about Closing Costs and Prepayment Penalties
When you have recovered from a financial setback, the next thing you should do is to pay all of your payables.
There’s a sense of fulfillment when you settle your home equity refinancing loan in full before its termination, and we share your joy in such financial victory.
That said, we’re not charging closing costs or prepayment penalties in case you settle your obligation before its expiration. This way, you can achieve financial freedom as circumstances allow it.
8.Gain Tax Benefits from your HELOC
Are you aware of the potential tax benefits and other home equity loan advantages that you can avail from your home equity credit line?
According to the 2017 Tax Cuts and Jobs Act (TCJA), you can consider the interest costs of your home equity refinancing loan as a deduction from your tax. That, of course, doesn’t go without a tradeoff.
TCJA further mentions that you can only deduct the interests of your HELOC from your taxes if the corresponding principal was used to cover substantial home improvements.
Aside from the above deduction, there might be other potential tax benefits that may come with your HELOC. We highly advise that you check these things with a tax advisor.
Conclusion
At first, a HELOC can seem like a financial liberation.
Imagine getting a fat credit line while paying less. When you get 80% or 100% of the appraised value of your home equity as your credit limit, anything becomes possible spending-wise. Sky’s the limit, as they say.
Luckily, GAFCU offers home equity refinance schemes that can help you out. For more information please email centralizedlending@greateralliance.org or call 201-599-5500 x 290 to speak with our home equity specialist.