Benefits of a Home Equity Line of Credit (HELOC)

If you have been looking for a way to finance a new kitchen renovation, go on your dream vacation, or pay off high interest credit cards? A Home Equity Line of Credit (HELOC) might be a great solution for you.  A HELOC is a line of credit funded by your home’s equity.

How Does a Home Equity Line of Credit Work?

You must be a homeowner to qualify for a HELOC because you are borrowing against the available equity in your home and your home is being used as collateral.  In some cases, you can borrow up to 80-95% of your home’s value.  HELOC rates are generally low but keep in mind, they are also adjustable.  HELOC rates are typically tied to prime rate so your monthly payment can increase or decrease over time due to fluctuating interest rates and the amount of money you use.

Flexible Spending Has Advantages

Some advantages of HELOC are:

  • You are allowed to borrow up to a certain amount for the life of your loan
  • You can draw from your line of credit as you need it
  • You only pay interest on the amount you withdraw 
  • It is simple to use these funds by just writing a check 
  • Interest rate you pay can be tax-deductible in certain situations
  • As you repay the outstanding balance, the amount of available credit is restored, much like a credit card

HELOC is a popular loan for those unexpected emergencies – such as home repairs, medical emergencies and car repairs.  Many parents use them to pay off college tuition bills, pay for weddings, or invest in a second home.  The best home equity line of credit is to finance renovations because it can add value to a home by leveraging the equity of it for these improvements.

How Much Money Can I Borrow?

HELOC calculator estimates your borrowing capacity and helps you determine the home equity line of credit amount you qualify to receive. 

Check out Missouri Central Credit Union’s HELOC Calculator

Step 1: Determine the appraised value of your Home
First you need to figure out how much equity you have in your home.  This can be done by subtracting the amount of money you still owe on your home by the current home’s value. 

Step 2: Calculate all outstanding mortgages
Second you need to calculate your total amount of mortgages you owe on your home.  This includes first mortgage, any second mortgages and any other debt secured by your home.

Step 3:  Factor in your loan-to-value ratio (LTV)
The loan-to-value ratio is the percentage of your home’s appraised value that your lender will allow. 
For example, an 80% loan-to-value ratio would allow you to have $80,000 in debt secured by a home appraised at $100,000 (100,000 x 80%).

HELOC calculators can also let you see how the amount you can borrow might change if the appraised value increases or decrease.

Repayment Period

Your payment period typically begins when the draw period on your HELOC ends-typically the first 5-10 years.  During the repayment period, which is usually 10-15 years, you will pay back the principal and interest with monthly payments.  Just be sure to keep up-to-date on your payments as your house is used for collateral, and if you default on the loan, the financial institution can foreclose on your home.

If HELOC sounds like a good fit for you, discover the advantages of Missouri Central Credit Union’s HELOC loan programs including exceptional HELOC rates plus:

  • 10 Year draw period
  • Up to 15 years to repay
  • Low or no closing cost
  • Borrow up to 95% of your appraised value

How to Apply for Best Home Equity Line of Credit?

Let Missouri Central Credit Union’s friendly loan officers help you determine if a HELOC can save money and provide you with extra cash to accomplish your goals.  Come into the lobby and we will walk you through the easy application process, home equity line of credit requirements and answer all your questions.  We will find the best home equity line of credit and interest rate available.

Our lobby is open Mon.-Thurs. 9am-5pm, Fri. 9am-5:30pm and Sat. 9am-1pm.  You can also apply online and we can assist with any of the steps by calling us at 816-246-0002.  Once you are approved, you will receive your HELOC quickly and without any red tape.

Our HELOC application includes:

  • Preliminary Information
  • Loan Information
  • Personal Information
  • Employment Information
  • Assets & Debts
  • Submit Application

Loan approval is subject to credit approval and program guidelines.  Contact us at 816-246-0002 to learn more about HELOC terms and conditions.