If you're thinking about how to pay for your child's college tuition, or making some home improvements, you may be thinking about tapping into your home's equity. Depending on your financial goals, home equity financing can be set up as a fixed term loan or a line of credit. To help determine the right home equity option, you first need to know the different between a home equity loan and a home equity line of credit.
What is the difference between a Home Equity Loan and a Home Equity Line of Credit?
A home equity loan has a fixed interest rate, fixed loan amount and a fixed monthly principal and interest payment, making it easier to factor into your budget. If you know exactly how much money you will need for your financial goal, then a home equity loan is the right option for you!
A home equity line of credit (HELOC) may be the right option for you if you're unsure of how much money you will need for your financial goal and need more flexibility when accessing your equity. A HELOC is a flexible credit option because funds from a HELOC work like a credit card and are available for you to use as you choose. As you pay off the principal, the amount paid goes back to your available credit line. However, because your home is offered as collateral, the interest rate for a HELOC is generally lower than credit card interest rates.
Both loan types draw on the equity in your home for you to use towards the things you want most in life - like taking your dream vacation, buying a new car, or building an addition onto your home.
Shore United Bank Home Equity Loan
Our home equity loan is offered at a fixed rate with term options of 12-180 months. At Shore United Bank, we offer a competitive interest rate of 4.99% with an Annual Percentage Rate (APR) of 4.996%1 for terms up to 15 years for your primary residence. Loan-to-Value requirements can range from 65% - 80%, depending on the loan amount requested and occupancy collateral type. Based on the loan amount borrowed, closing costs will vary and are due at the time of closing.
Shore United Bank HELOC
Our HELOC is offered at a variable rate equal to the highest Prime Rate published in the Wall Street Journal. As a variable interest rate loan, the Annual Percentage Rate (APR) could change as often as daily but will not exceed 24%. As of March 17, 2020, the APR was 3.25%. Subject to credit approval, the amount of your credit line can be up to 85% of your home's value, available on primary or secondary residences only.
With a 10-year draw period, you'll be able to withdraw funds from your total line of credit for up to 10 years. During the draw period you have the option to repay interest-only or principal and interest. The draw period is then followed by a 20-year repayment period with a minimum monthly payment of 0.42% of the principal balance, plus accrued interest or $100 (whichever is greater). What this means is that you'll have the option to use this line of credit for up to 10 years, then take up to 20 years to pay back the principal balance and any accrued interest. According to tax guidelines, paying interest on a HELOC may be considered tax deductible. We encourage you to contact your tax advisor for more information on the tax deductibility of our HELOC.
As with any loan, closing costs should be accounted for. Depending on your loan circumstances, fees and charges associated with HELOCs total between $549.00 and $3,539.00. Shore United Bank will provide a closing cost credit to cover total closing costs up to $2,000.00. If your total closing costs exceed $2,000 you will have the option of paying the closing costs at settlement directly or from an initial draw against the line. Any third-party fees paid on your behalf will be required to be reimbursed in the event the loan is paid off and closed withing 36 months of the loan date. We are happy to provide an itemized statement of fees upon request.
1The Annual Percentage Rate (APR) is based on the following example. $100,000 loan for a single-family primary residence with an interest rate of 4.99% would result in 180 monthly payments of $790.50. Payments do not include taxes or insurance. Your payment may be greater. Borrower must maintain insurance on the property securing credit.
All loans are subject to credit approval, and the borrower must maintain insurance on the property securing credit.