Market improving for home equity line of credit

Homes values are starting to rise again, which makes it a good time to consider a home equity line of credit.

Before the “Great Recession” of 2008 and 2009, one of the most common and convenient ways homeowners had to finance big-ticket items like vehicles, weddings, home improvements, vacations, etc. was a home equity line of credit, or HELOC. But then home values plummeted during the recession, which hit homeowners and homebuyers hard.

As the values of homes declined, it reduced the amount of equity available to borrow against. Thankfully, here in York County we didn’t see the substantial drop in home values as in other parts of the country, but we were still negatively impacted.

Home values dipped an average 10 percent when the economy soured in 2008, says Jay Rinehart, broker/owner of Rinehart Realty Corp. In some areas of the county, prices have recovered 5 to 7 percent – and up to 14 percent in parts of Fort Mill. Overall, he says, things are looking much better.

That’s good news if you’re a homeowner and need to finance a purchase or even consolidate debt. A HELOC is as easy to use as a credit card. Just draw what you need and pay it back as you use it.

A HELOC uses your home as collateral and you can typically borrow 80 percent of the appraised value at Family Trust. In some cases, we can lend a higher percentage based on credit worthiness, ability to pay debts, and income. Equity is the difference between the appraised value and the total amount you owe on your home.

In most cases, the interest is tax deductible* and the rate is going to be a lot lower than rates for credit cards or other forms of credit. Once approved, it’s generally good for 15 years. An interest-only option with a 10-year advance period is also available for qualified borrowers.

You can apply in a branch or through online banking. A Family Trust loan representative is more than happy to help you gather the needed information:

  • Income verification
  • Proof of insurance
  • A copy of your latest mortgage statement
  • A new appraisal ordered by Family Trust
  • An attorney to perform the closing

Here are some answers to common questions:

What’s the difference between a Home Equity Line of Credit and a Home Equity Loan?

A Home Equity Line of Credit works like a credit card in that you draw what you want and pay back a certain percentage each month. Payments for a Home Equity Loan work more like a car loan with a fixed rate, fixed term, and monthly payments that do not change.

Once I get a HELOC approved, how can I access the money?

Very easily through online banking, writing a check, or visiting a branch.

Does Family Trust offer fixed and variable rates on HELOCs?

All of our HELOCs have variable rates based on an index above or below the Wall Street Journal Prime Rate. Rates on your HELOC are determined by your credit and the amount of equity in your home. Rates can adjust based on changes in the Wall Street Journal Prime Rate on a quarterly basis.

Of course at Family Trust, we’ll take the time to help you decide what home equity line is right for you. Call or drop by our Mortgage Service Center at 803-367-4100, ext. 3140. Or read more at the Federal Reserve Board’s What You Should About Home Equity Lines of Credit.

*Check with your tax advisor.

Ron Miller is executive vice president, operations at Family Trust.