Earlier this year, we gave you the low-down on Home Equity Lines of Credit (HELOCs) on the UECU Blog, and now it’s time for the promised Part 2 of our discussion – today, we’ll share a bit about HE Term Loans. Both loan products offer lending opportunities in which the funds you borrow are secured by the equity in your home – to review, that’s the difference between your home’s fair market value and the amount you currently owe for any property liens. If you missed our first discussion about HELOCs, just follow this link to catch up on our March post – and if a line of credit is the right product for you, it’s a great time to be a UECU member – we just dropped our UECU HELOC rates!
What is a Home Equity Term Loan?
So, last time we discussed that a Home Equity Line of Credit is a home equity product with a revolving balance and variable rate. A Home Equity Term Loan differs in that the borrower receives a lump sum, which they repay with a fixed interest rate over the set loan term period. This loan is also secured with the collateral of home equity, allowing consumers to borrow at a more affordable rate than most unsecured loans, for educational, home improvement, debt consolidation, and other special expenses. Both Home Equity Term Loans and HELOCs offer the potential for possible tax benefits (ask your tax advisor).
How Do I Know I’ve Picked the Right Home Equity Product? Should I Refinance An Existing Loan?
Obtaining your home equity product from a secure and trusted financial institution is essential (you may see home equity and “second mortgage” products offered by “alternative lenders” such as home improvement contractors, but these lending arrangements can lack the reliability and transparency you should expect from your lender). When applying for a Home Equity Loan, understand and ask your financial institution about the associated fees and closing costs – real estate loan costs like an appraisal and title search are typical but may be waived by some institutions – while some states require additional costs for the loan closing process.
UECU offers Home Equity Term Loans with clear terms and rates for various Loan to Value ranges. If you have a home equity loan from another financial institution, you may want to contact UECU for an analysis of whether refinancing would benefit you – and how much you might save if there is an opportunity to refinance your loan at a better rate. Refinancing may also provide opportunities to adjust the amount you have borrowed. You may want no additional money beyond your current loan balance – or you may prefer to take new money to make home improvements, make large purchases, consolidate debts, or fulfill other expenses. On the other hand, if you would like to reduce your loan amount, refinancing may be an opportunity to pay down some of your balance in a lump sum or to take a shorter term to repay your loan more quickly.
source: http://blog.uecu.org/2013/07/22/more-home-equity-facts-to-increase-your-financial-savvy/
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