Q: What is a home equity line of credit (HELOC)?
A home equity line of credit is a type of revolving credit that uses your home as collateral.
Q: How does a HELOC work?
The HELOC includes a draw period of 10 years followed by a repayment period of 15 years. During the draw period, you can borrow as much or as little as you need, whenever you need it. During the draw period, as you repay your outstanding balance, the available credit amount is replenished. This means the amount you can borrow increases, up to your credit limit.
Q: What is the HELOC interest rate?
The interest rate is variable, based on the Prime Rate plus a margin.
Q: How is the HELOC monthly payment determined?
The monthly payment amount during the draw period is interest only based on the outstanding balance. We encourage you to pay more than the minimum amount due to rebuild the equity into your home and reduce the total amount of interest you will owe. The monthly payment during the repayment period is principal and interest based on the outstanding balance.
Q: How do I know if I’m eligible for a CU SoCal HELOC?
Once we receive your application for a HELOC we review several criteria, such as your credit history, employment, income and the amount you’re requesting to borrow. We also consider your loan-to-value (LTV) ratio, which is the total amount you want to borrow plus your remaining mortgage loan balance divided by the value of your home.
Q: How do you determine the value of my home?
CU SoCal uses multiple sources to determine your property value, including ownership deeds, recent home sales reports, property records and other mortgage records. We may also get an appraisal of the property during your application process to confirm its value to support your requested line amount.
Q: Does the home I’m requesting to use as collateral need to be my primary residence?
Yes. Eligible property types include single-family residences (such as a house or townhouse), attached single-family residences (condominium) and owner-occupied two- to four-unit residences.
Q: How much can I borrow?
Your credit limit will depend on the amount of equity in your home, your income, your credit history and property location. We also consider your LTV ratio; some HELOC products have LTV up to 90% of the value of your home.
Q. Can I apply for a CU SoCal HELOC if I’m self-employed?
CU SoCal HELOCs are available to self-employed members. We will review your income documentation, including your business and personal tax returns along with other documents to demonstrate your ability to repay.
Q. Can retirees apply for a CU SoCal HELOC?
You can apply for a HELOC if you’re retired. We will need previous two years’ tax returns, pension/Social Security award letters and IRA/investment statements along with other documents to demonstrate your ability to repay.
Q. What are the major pros of getting a CU SoCal HELOC?
Use what you need, when you need it. Borrow the money you need to consolidate high-interest debts, to complete home improvements or home repairs, or for other large expenses that you wish to pay over time.
Reduce your interest payments. Interest rates for a HELOC are usually lower than those for personal loans and credit cards. You may be able to lower your interest payments by consolidating your debt into a HELOC, which will save you more over time.
Potential income tax benefits. If you use your HELOC for home improvements, a portion of your interest may be tax deductible. Discuss your situation with your tax advisor to determine what interest may be deductible.
Q. How can I compare different HELOC options?
Comparing the annual percentage rate (APR) of different HELOC options and lenders may not be enough to find the right option for you because the APR only considers the interest rate on the line of credit. You should ask lenders about any fees, payment options and the length of their draw and repayment periods when comparing your options.
Q. How soon can I access my HELOC?
Once you sign the HELOC loan documents, you have a three-day period called your “right of rescission” and it must pass before you can access your line of credit. Once your right-of-rescission period is over, funds can be disbursed on the fourth business day after signing.
Q. How do I access my CU SoCal HELOC?
You can transfer funds to your CU SoCal checking account or to an external account via online banking, or in person at your nearest branch. You can use your HELOC checks to draw money from your account.
Q. How long will it take to obtain a new CU SoCal HELOC?
It takes up to 30 days to finalize and fund your CU SoCal HELOC after you submit your application and required supporting documents and complete any required disclosures.
Q. Why is my interest rate variable and how does it affect my monthly payments?
The interest rate of your HELOC is variable, which means your minimum payment amount may change when your rate changes. You can always make additional principal payments online, in person at any CU SoCal branch or by mail using the payment coupon attached to your monthly statement.
Q. What are my payment options when I begin my repayment period?
Continue making your monthly payments. No action is required on your part for this change to happen. You’ll see your new payment amount on your monthly statements. You can also pay off the outstanding balance at any time.
You could also refinance your outstanding balance into a new home equity account or new mortgage if you meet current credit criteria. Contact us before your draw period ends to discuss your options.
Q. Can I extend my CU SoCal HELOC draw period?
The draw period for your existing CU SoCal HELOC cannot be extended. You could refinance your outstanding balance into a new home equity line of credit or mortgage loan if you meet current credit criteria.
Q. Will my minimum monthly payment go up?
Your minimum monthly payment amount may be adjusted when your repayment period begins, depending on the terms of your credit agreement.
Q. What do I need to do if I want to continue making automatic payments each month?
No action is required on your part for this automatic payment service to continue. However, please consider the impact on your checking account if your minimum payment amount is expected to increase.
Q. I've already paid off my outstanding balance. Is there anything I need to do to close my account?
Yes, please contact us to request a payoff quote because you may be required to pay a lien-release fee from the county clerk's office to close your account.
Q. What is a lien-release fee and why am I required to pay it?
Your county clerk's office charges a fee for processing the release of the lien on your property. Your payoff quote will show this fee, which you're required to pay to close your home equity line of credit.