A Home Equity Line of Credit is an open-ended, revolving loan with a variable rate that allows you to withdraw funds from your available line of credit, just like you would with a checking account. A HELOC is a sound way to use the equity in your home (the amount of your home’s appraised value that you own once the remaining principal balance is subtracted) to finance home improvement projects or to consolidate debt from credit cards and other loans into one easy monthly payment.
HELOCs are best for people who need to be able to draw funds as necessary over a span of time. Here’s an example: Let’s say you’re starting a very large home improvement project, like an addition, and you don’t know how much the project will end up costing or how long the project will take to complete. A HELOC would be quite advantageous for you because you will only be borrowing money as you need it, when you need it, to get this addition built.
A note about HELOC payments: Minimum payments for Bronco HELOCs are calculated using one of three options, depending on your loan terms:
- Option 1: 0.50% of the principal balance—Example: Your principal balance is $25,000 and the interest rate is 6.00% APR (Annual Percentage Rate). 0.50% of $25,000 is $125.00. Based on the 6.00% rate, interest for a 30-day month is $123.29. Therefore, the payment would be $125.00, with $123.29 applied to the interest and $1.71 applied the principal of your loan.
- Option 2: Interest due for the preceding month—Example: The “Interest Due” amount on your statement is $248.00. If this amount is the greatest of the three options, you are only making payments on the interest alone. Interest-only payments do not reduce your principal.
- Option 3: $50.00—Example: If 0.50% of your principal balance is $25 and your “Interest Due” amount on your statement is $32.88, your payment will be $50.00.
Another important note: Unlike a conventional loan where the Annual Percentage Rate is fixed over the course of the loan, a HELOC’s rates are variable and may change as the Prime Rate (a rate established by the Federal Reserve Board based on what banks charge their most creditworthy customers) fluctuates.
To find out how a Home Equity Line of Credit can work for you, talk with one of our Real Estate Lending Specialists by visiting any Bronco office, calling us at 757.569.6000 (or toll-free at 1.800.667.BFCU), or emailing us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
A Bronco Home Equity Line of Credit offers:
- A flexible source of credit
- Access to funds when you need them
- Low interest rates
- Rate will never exceed 18.00% by law (Your specific rate is based on the Prime Lending Rate, which is established by the Federal Reserve and often fluctuates over time. Since a HELOC is a variable rate loan, if an increase in the Prime Lending Rate causes your HELOC rate to increase, by law it can never exceed 18.00%.)
- Possible tax advantages (consult you r tax advisor)
- Loan-to-value (LTV) ratios up to 80%, but not to exceed $100,000 (As an example, if your home has been appraised at $200,000 and you still owe $100,000 on the mortgage, then your equity in the home is $100,000. Now, let’s say you want to borrow $80,000 against that $100,000 of equity. $80,000 divided by $100,000 equals an 80% loan-to-value ratio.)
- Appraisals required for any LTV over 70%
- Rates as low as Prime (a rate established by the Federal Reserve Board based on what banks charge their most creditworthy customers)
- 20-year repayment period (After an established “draw period,” or the length of time the borrower is allowed to withdraw funds from the line of credit, has passed, funds may no longer be withdrawn and must be paid back within the “repayment period” phase.)
Check out our current mortgage rates.
For your added convenience, you can apply in person or online.
Not a member yet? Give us a call today at 757.569.6000.
