Home Equity Tutorial                      skip tutorial, show me rates

What is home equity and do I have any?

Equity is the difference between the fair market value of your home and what the balance is on your mortgages. In this tutorial, we will give you some insights on the benefits of using your home equity to get low cost financing towards a multitude of options.  

1. Has the value of the homes around your area increased recently?

2. Did you put a down payment when you purchased your home?

3. Do you owe less on your mortgages than the value of your home?  

If you answered yes to any of the questions, most likely you have equity in your home.

Example:  

Fair Market Value:	$200,000
Mortgage Balance:	$100,000
Home Equity Available:	$100,000

Can I borrow against the equity in my home?

Yes, equity is great because you can tap into it without selling your home. Borrowing against the value of a home has become increasingly popular because of the historically low interest rates and the potential for tax deductibility.

 We offer a variety of home equity loans and home equity lines of credit. Compared to other types of loans, home equity loans can deliver lower interest rates when you tap into the equity in your home.

 Is it beneficial to get a home equity loan?

The interest rates of home equity loans, when compared to credit cards and similar loan products, are generally lower. When you take into account the life of the loan, a home equity loan or home equity line of credit can save you hundreds or even thousands in interest dollars. Think of how much you can save when making purchases with interest rate as low as 5.5% APR home equity line of credit* compared to 15% APR credit card.

You choose the payment terms you would like to maximize your finances. Home Equity Lines of Credit offers up to 10 years of interest only payments.  Now that is flexibility!

 Is the interest on your credit cards or other loans tax deductible? Did we mention the potential tax deductibility you can enjoy with a home equity loan or line of credit? Consult your tax advisor for full details.

What types of home equity products do you offer?

There are 2 types of home equity product.  A fixed interest rate home equity loan and a variable rate home equity line of credit.

 Each home equity product has its own unique benefits and is vastly different.

- fixed rate home equity loan

• The interest rate, your monthly payment and loan terms are fixed for the life of the loan.

• The interest rate and payments will not fluctuate with the market.

• You will get the money in one lump sum after closing the home equity loan.

 - variable rate home equity lines of credit

• Home equity line of credit is similar to a credit card but generally have a lower rate. There is a credit limit established based on your home’s equity and credit worthiness.

• You can draw on your Line of Credit as you need it making this product a powerful financial tool for you and your family.

• Interest rates on Lines of Credit are generally lower than fixed rates and are tied to the Prime Rate, featured in the “Money Rates” section in the Wall Street Journal. Therefore, the rate may fluctuate with the market.

• You can make interest only payments for up to 10 Years or you may payoff your entire balance at your convenience.

• Funds can be accessed with checks that are provided to you by the lender.

 Some uses for a Home Equity Loan or Line of Credit:

• Debt Consolidation: Our customers often turn to us to alleviate the financial burden incurred through their high interest credit cards.

 Example:
15% plus Visa or MasterCard even compared to an 8% home equity line of credit can save you money each month! High minus low is $$ in your pocket.

• Using a home equity loan or line of credit can ease your monthly interest payments which can:

            1. Give you more opportunity to reduce your principal quicker.

            2. Help you save on your monthly payments.

• Plus compared to credit cards, the interest on a home equity loan or line of credit may be tax deductible while a credit card is not.†

• Reducing your monthly debt payments will improve your debt burden which in turn will heighten your credit worthiness.

 • Home Improvements: What is a sure fire way to increase the value of your home? Making home improvements on your dwelling will not only create a more comfortable setting but may also allow you to sell your home at a higher value.

o Use a home equity loan or line of credit to do home improvements and increase your home’s value.

o Extra room or a new in ground pool can be obtained easier and can be more affordable with a home equity loan or line of credit.

• $0 Down on Large Ticket Items:

o The interest rate and tax benefits from using a home equity loan or line of credit makes it an attractive option for financing a new car, boat, vacation home, a time share in Maui or that dream vacation you have been planning all your life.

 

• Education: How much does a college education costs today? More than you realize. Is higher education needed in today’s market? Yes. Can you really afford it?

o You can’t put a price on the value of education. But you can save and finance your or your children’s educational pursuits. A degree, masters, doctorate or MBA can pay for itself many times over in today’s highly competitive world. Arm yourself with a home equity loan to combat the sky rocketing costs of today’s higher education.

o Schools give great packages today but it is difficult for schools to offer grants and scholarships for everything. Inject some cash into your education fund with a home equity loan to get you through any time.

 

• What If’s in Life: Life has surprises around every corner. We hope that your next turn is a good one. Our Home Equity products will also be there for the unexpected turns too. Our low rate home equity lines of credit are there for our customers when they need it…sometimes more so than others.

o Having a home equity line readily available to you is a valuable asset that you can fall back on during times of hardship.

o Interest only payment options will give you the ability to push through tighter financial times.

o Unexpected medical bills or other costs can now be met with an affordable financing rate using a home equity line of credit.

 A home equity line of credit or loan? Which is better for you?

It is not always easy to decide what home equity product would best fit your needs but here are some guidelines:

• Home Equity Line of Credit:

o Need to borrow money periodically to pay off re-occurring expenses.

o There is not a fixed amount that is needed at closing.

o Plan on paying back within 5 years.

o Borrower does not need a fixed monthly payment to keep debts in control.

o Enjoys the flexibility that comes with a line of credit.

o Knows that monthly payments and rates may vary.

• Home Equity Loan:

o Have a set amount of funds needed at closing of loan.

o Enjoys having a fixed rate and a fixed monthly payment for the life of loan.

o Plan on taking more than 5 years to pay back.

o Does not need to periodically draw on funds.

 Which ever product you feel best fits your needs at this moment; We will be there to help you along every step of the way.

 Are intro rates important?

Intro or “teaser” rates are great and can save you money but it is the rates after the intro that matter.  We concentrate on helping borrowers save for the life of their relationship with us and not in 3 to 6 months spurts.

• Be wary of other lenders who offer a very low teaser rates but after a few months increase the rate up higher than others.

• .25% APR teaser rate for 3 months on a $25,000 home equity line of credit (at full draw) will result in approximately $16 worth of savings.

            1. $25,000 X .25% APR = $62.50 annual savings

            2. $62.50 / 12 month = $5.21 month savings

            3. $5.21 X 3 month teaser = $15.63 savings

 Follow the simple calculations above and it should help you understand if the intro rate is really better than our everyday low rates for the life of the loan or line of credit.

 

What fees and costs are associated with a home equity loan or line of credit?

Many banks, brokers and other lenders charge many fees, points and closing costs which can add up for the borrower. Some lenders will charge a higher up front costs in order to reduce your interest rates. But with our home equity, we make it simple for the borrower; we can give you a lower rate without charging points, closing costs and most fees.

Example:

-application	Processing fee for the application, usually no refund.		$0
-attorney	Costs associated with an attorney for legal documents.		$0
-appraisal	Fees to get a fair market value on the home.		$0
-title search	Costs to verify the ownership of the home.		$0
-prep & filing	Preparing the files and deeds for mortgage company.		$0
-points (varies)	Example: 1 point for a $100,000 loan = $1,000		$0
Cost you must incur to access your own home’s equity.		None.
HELOC Related		Fees for incurred for HELOCs
-transactional	Costs associated with every HELOC transaction made.		None.
-inactivity	Built in penalty fee for periods of inactivity on your account.		None.
-annual	Annual maintenance fee associated with a HELOC.		$50, waived first year.
-early closure	Closing a line out within a set period of time est. by lender.		None, if line is opened for 3 years.