Home Equity Loan & Home Equity Line of Credit

Home equity loans and home equity lines of credit (HELOC) are two of the most popular ways to use a home as collateral for a loan. Understanding these options can secure low-cost funds in the form of a “second mortgage.”

Helping You Understand Home Equity Lines of Credit

Are you wondering how a home equity loan works, whether home equity loans are tax deductible, or whether a home equity loan or a line of credit is right for you? When you work with Core Bank, our team of experienced professionals will help you better understand the options available to you and the benefits they pose.

Reach out to our team today to learn more about our available lines of credit and loan options!

Home Equity Loan Vs. Line of Credit

While home equity loans and lines of credit are both ways to use your residence as collateral, they’re very different in how they work.

Home equity loans come with fixed payments for a specified term, giving borrowers a predictable schedule of payments over a defined period of time. They often arrive as a lump sum with a fixed interest rate.

Home equity lines of credit are revolving lines of credit with interest rates that fluctuate over the life of the loan. They operate somewhat like a credit card, allowing you to draw money as you need it—given that you keep up your payments. You only pay interest on the money that you use.

How to Get a Home Equity Loan

Our team at Core Bank can help you decide between a home equity loan or a home equity line of credit, then apply for the option that best suits your needs! There are five base requirements you’ll typically need to meet to secure one of these loans:

  • Have 10% equity in your home
  • Have a debt-to-income ratio of 41% or lower (can be approved without meeting this ratio)
  • Have sufficient income
  • Have a reliable payment history

Home Equity Loan FAQs

What can I use a home equity loan for?

You can use the money from your home equity loan to pay for anything. The funds are yours. It is common to see these loans used for home improvements, debt consolidation, funds to put down on a new home purchase, or just emergency funds! It is best to apply for credit when you don’t need it.

Are home equity loans tax deductible?

Home equity loan interest is tax-deductible if your mortgage debt is within government limits and the borrowed money was used to build, buy, or improve your home. Consult a qualified tax advisor for more information on what’s allowable.

Do home equity loans require escrow?

Lenders often require that their borrowers create an escrow account when they finance the purchase of a home with a mortgage loan. At Core Bank, we do not require an escrow account with a home equity loan.

Is a Line of Credit or Loan Better for me?

Core Bank can assist in determining this, however, a line is right for someone who is uncertain of the amount they will ultimately need or if it’s being used as overdraft protection or emergency funds.  Lines allow for low monthly payments, often interest only as well as the ability to advance funds when you need them. Loans can provide peace of mind as the rate is fixed for the term and payments will ensure the debt is paid upon maturity of the loan. 

Contact Core Bank

If you’re ready to get started with any treasury services from Core Bank, let us know! Get in touch with our team today.

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