You’ve likely heard of “HELOCs,” or home equity lines of credit. But maybe you aren’t exactly sure what they are, how they work, or how you can use one. To help you better understand HELOCs and whether they’re the right financing solution to help you achieve your financial goals, we’ve gathered the facts, insights, and answers to commonly asked questions below.
What is a HELOC?
“A HELOC is a loan product that leverages the equity in your home,” explains Lilynda Stewart, Director of Home Equity Products at Golden 1 Credit Union. “Unlike a home equity loan, where you get a fixed amount of funds at once, a HELOC acts like a line of credit, up to a specified amount. You make payments on what you withdraw, and you can continue to use the funds you have available. Your line of credit is replenished as you pay it down.”
What can you use HELOC funds for?
A HELOC can be used to fund nearly any expense — from home improvement projects like a new roof or a landscaping project, to a wedding, college tuition, or consolidating high-interest debt.
How much can you borrow with a HELOC?
A HELOC uses your home as collateral, so the amount you can borrow depends on how much equity you have. Your home’s equity is the difference between what you owe on the mortgage and the home’s current value.
“With a Golden 1 Home Equity Line of Credit1, members can typically borrow up to 80% of their home’s value — from $25,000 to $700,000 — depending on the value of their home,” says Stewart.
Why should you consider a HELOC versus other borrowing options?
“Compared to a traditional installment or consumer loan, a HELOC generally offers lower interest rates, more flexible terms, and a higher borrowing limit,” says Stewart. Plus, with the Golden 1 HELOC, you pay no application fee, no closing costs, and no annual fee.
A HELOC can be a smart choice if you’re not sure how much you’ll need to borrow or when you’ll need it. You can even re-use funds as you pay down your balance during the draw period, without reapplying. And in some cases, the interest you pay on the funds you borrow may even be tax deductible.2
How soon do you need the funds?
The time needed to approve a HELOC application and have funds ready to use can be up to 30 days due to the document processing time required when a home is used for collateral. You can help streamline the process by gathering application documents in advance, such as paystubs and, bank statements.
You can quickly apply for a Golden 1 HELOC through the Golden 1 Home Loans App, which lets you view your application status 24/7 and keep your loan documents in one place.
Once your HELOC account is open, accessing funds is easy. For example, our Golden 1 HELOC lets you easily pay for purchases with a Visa credit card, checks, or by transferring funds to your checking account.
How long do you want access to funds?
“HELOCs are designed to let you access funds over an extended period, whether it’s a few months or several years,” explains Stewart. At Golden 1, we offer a 10-year draw period and 20-year repayment period to pay off your balance.
How do you repay a HELOC?
Your HELOC payments are based on the funds you use, not your total line amount. Since HELOCs typically have variable interest rates and you can make multiple draws over time, your payment can change. A Golden 1 HELOC gives you the flexibility to make lower, interest-only minimum monthly payments during the draw period. You can also convert all or part of your outstanding balance to a fixed rate, giving you a stable, predictable payment.
Three factors to consider if you’re thinking about a HELOC
A HELOC can be a smart, convenient borrowing option to help you achieve your financial goals. Stewart recommends keeping these factors in mind to help you determine if this borrowing option makes sense for you.
1. Review your mortgage statement to confirm what you owe compared to what your home is worth. To qualify for a HELOC, you must be a homeowner and have some equity in your home.
2. Check your credit. Your credit score will help determine your rate and the amount of your credit line.
3. Examine your budget to make sure there’s room for monthly HELOC loan repayments.
Golden 1 can help
We’re ready to help you leverage the equity in your home and achieve your goals.
Learn more about a Golden 1 Home Equity Line of Credit
Apply for a HELOC online or via the Golden 1 Home Loans mobile app.
Questions? Speak to a Home Loan Advisor by calling 1-800-917-9000, or visit a local branch.
Sources
“What Is a Home Equity Line of Credit, or HELOC?,” Kate Wood and, Taylor Getler, NerdWallet, updated June 24, 2024 , https://www.nerdwallet.com/article/mortgages/heloc-home-equity-line-of-credit
"HELOC (Home Equity Line of Credit) and Home Equity Loan: Comparing Your Options,” Daniel Kurt, Investopedia, updated August 25, 2024, https://www.investopedia.com/mortgage/heloc/
“Home Equity Loan vs. HELOC: What’s the difference?” Amy Fontinelle, Investopedia, updated August, 15, 2024, https://www.investopedia.com/mortgage/heloc/home-equity-vs-heloc/
1The Golden 1 Home Equity Line of Credit (HELOC) is limited to one- to four-family owner-occupied units, vacation properties, and investment properties located in the state of California. Excludes mobile homes. Before your HELOC is funded, all loans secured by your home other than your first mortgage must be paid off. Contact the credit union for terms and conditions for refinancing an existing Golden 1 equity loan or line of credit. Other programs are available.
Your HELOC application is subject to property valuation. Your maximum loan amount will be calculated using the combined loan-to-value (CLTV) of your existing first mortgage principal balance and new second mortgage according to current guidelines. All programs and maximum CLTVs are subject to change or termination without notice.
This is a variable-rate line of credit. The monthly periodic rate and APR (Annual Percentage Rate) may vary. Changes in the APR will be based upon changes in the Prime Rate and may be adjusted monthly. The maximum APR that can apply is 18% and the minimum is 4%.
There is currently no annual fee for your participation in the credit plan under the HELOC Agreement. There are no other fees to open, use, or maintain this account except third party fees, such as property insurance, as required in the HELOC Agreement. Property insurance is required. Flood insurance may be required.
An Early Termination Fee will be assessed if the line of credit is paid in full and closed within three (3) years from the date of opening, in the amount of $500.
2Consult your tax advisor regarding the deductibility of interest. Golden 1 does not provide tax advice.
All loans subject to approval. Rates, terms, and conditions are subject to change and may vary based on creditworthiness, qualifications, and collateral conditions. Golden 1 Credit Union is not part of any government agency, nor do we represent or have the endorsement of HUD, FHA, the U.S. Government, or any federal, state, or local government agency.
