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Affinity Title

MORTGAGE KNOWLEDGE CENTER

PenFed Mortgage with Confidence

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image

HELOC LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

  1. Home
  2. Mortgage Knowledge Center
  3. 10 Creative Ways to Use Your Home Equity

MORTGAGE

10 Creative Ways to Use Your Home Equity

What you'll learn: Learn how a HELOC can be leveraged to your advantage

EXPECTED READ TIME: 6 MINUTES

May 7, 2023

Once you’ve built up enough equity in your home, or the value of the percentage you have paid off, you can convert some of it to cash. A home equity line of credit (HELOC) helps many homeowners reach financial freedom by using it to pay for things like student loans, credit card debt, and large home improvement projects. However, these are just some of the most common ways that a HELOC can help. While you should be savvy and make a plan when you borrow a line of credit, it is important to know all your options. Here are some creative ways to use a home equity line of credit.

1. Sell and use the profit to upgrade to a new home.

Are you ready to move out of your current home and into new one? Selling your current home in a seller’s market after building up equity could help you into the home of your dreams.

2. Pay for new construction.

If you have your sights set on a new build, using your home’s equity might be the best choice to fund the work. Traditional construction loans come with a lot of red tape and qualifications as building plans, estimated schedules, and budgets must be provided in advance. A HELOC can offer flexibility as needed, as well as a lower payment structure, since you only pay for what you spend.

3. Fund assisted living and long-term care.

Assisted living and nursing home expenses can be extremely costly. Leveraging a HELOC can help with the cost of long-term care, and allow your loved ones to maintain their independence as long as possible

4. Complete a home exterior makeover.

Bump up the curb appeal and the value of your home by giving the exterior a makeover. Remodeling structures like entry doors, garage doors, and exterior siding can add major value if you ever decide to sell.

5. Adjust rooms for your new work-life balance.

As more homeowners opt for hybrid or remote work, investing in upgrading your current work space can help create an optimal work-life balance.

6. Add more efficient features to your home.

Adding specific features to your home can add serious value without undertaking a large remodel. Improvements like replacing windows, swapping out older appliances, and adding energy efficient features are all smart ways to use the equity in your home.

7. Fund a passion project.

A HELOC can be a great way to fund some of your passion projects like starting a new business, building furniture, or maybe even restoring old cars and boats.

8. Cover legal fees.

Life can be unpredictable and opening a HELOC can help buffer against legal fees from unexpected life events like divorce, child custody, an arrest, or even business litigation.

9. Fund wedding and honeymoon expenses.

While we recommend adjusting and limiting your spending for the big day, it might make sense for some couples to take out a HELOC to cover wedding and honeymoon expenses. A traditional wedding loan can have very high interest rates, so opting to use the equity in your home might open up some extra cash flow.

10. Open a line of credit just in case.

A HELOC can be helpful in emergencies because it has a revolving line of credit that you can use whenever you need. You can use most HELOCs for up to 5 to 10 years (this is referred to as the draw period). You only have to pay back what you use, so if you never touch your funds, you never have to pay interest.

When not to use your home equity

The main reasons to opt for a HELOC are when the purchase or project adds significant value to your home, places you in a better financial situation, or eases stress and provides a better quality of life. For most other purchases, preparing a savings plan to save your money over time is best.

In some cases, your home may not increase substantially over time. This downward trend can be related to economic downturn, extreme weather, natural disasters, or fire damage. Keep this in mind to ensure you will be able to pay your regular mortgage payments along with the new fees from the line of credit.

Speak with your loan originator to help you establish a financial plan to improve your finances and help you calculate your equity and credit budget.

For more information about PenFed Mortgages:
 

PenFed Mortgage: 

800-970-7766

Get Started

SIMILAR ARTICLES

How Much Equity Do I Need for a HELOC?

Find out HELOC requirements, how long it takes to get a HELOC, and how much equity you need for a HELOC here.

HELOC for home improvements

Personal Loan vs. HELOC: Which Is Right For You?

When comparing a personal loan vs. a HELOC, the choice depends on your situation. We’ll explain the pros and cons of personal loans and HELOCs and which is right for you.

personal loans or HELOC

HELOCs & Home Equity Loans – Top FAQs

Using the equity in your home and getting a HELOC, or home equity loan is a big decision. Discover the pros and cons and get your top questions answered.

Large American beautiful house with red door.

What Is a Home Equity Loan?

Find out what a home equity loan is, including the pros and cons. We’ll talk about tax-deductibility and how to calculate equity. Then you can decide if one is right for you.

Couple discussing home improvements.
image

HELOC LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Home Buying Steps

  • Getting Started
  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

Mortgage Topics

  • VA Loans
  • Conventional Loans
  • First Time Homebuyer
  • Home Equity
  • Homebuying 101
  • Checklists
  • Adjustable Rate Mortgages
  • PenFed Top 10
  • Refinance
  • Jumbo Loans
  • FHA
  • Videos

Mortgage Products

  • Mortgage Center
  • Refinancing
  • Home Equity

PenFed HELOC

Rates as Low as % APR* with flexible use of funds

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Disclosures

1Prime Rate is % as of . The APR for this Home Equity Line of Credit (HELOC) is based on prime plus a margin and can change monthly. Fixed Rate Advances will be amortized over the Fixed Rate Advance Term, with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin, and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes.

  • Annual Fee: Notwithstanding the foregoing, an annual fee of $99 will be assessed on each account anniversary.
  • Home equity lines of credit (HELOC) are variable rate loans and the interest rate is subject to increase after consummation of the loan on monthly basis. Closing costs range between $500 and $8,500 for credit lines of $500,000. Contact a representative for additional details.

Appraisals: PenFed will attempt to establish value via an independent method. If that method is unsuccessful, or the value is not sufficient for the amount requested, an appraisal will be required regardless of CLTV. An appraisal is always required in the following circumstances:

For all loans with a loan amount greater than $400,000.

If an appraisal is required, it must be ordered by PenFed. You will be contacted for authorization and payment prior to ordering. Appraisal fees average $550 to $850 (some run higher).

  • Closing Cost Credit: PenFed will pay most closing costs associated with a home equity line of credit (HELOC), which includes credit report, flood certification, settlement/closing, property ownership and encumbrances search, recording, property search, and quick close. Member is responsible for any city, county, and/or state taxes if the subject property is located in FL, LA, MD, MN, NY, TN, or VA. If an appraisal is required, the member, who is responsible for the fee whether or not the loan closes, will pay the cost.

Interest may be tax deductible, consult a tax advisor for further information regarding the tax deductibility of interest and charges.

Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Advance Period. During your Advance Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.

Fixed Rate Advances will be amortized over the Fixed Rate Advance Term with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes and 4.75% for investment properties.

Property Insurance: Property insurance is required.

Multiple PenFed Loans: Multiple PenFed Equity loans and HELOCs are available as long as the member and collateral qualify (except Texas). For Equity loans and HELOCs the total indebtedness cannot exceed $500,000 for all PenFed Equity and HELOCs combined.

PenFed does not lend on:

  • Mobile homes
  • Co-ops or time-shares
  • Properties that are currently listed on the market for sale
  • Commercial property or property used for commercial purposes, even if a residence is part of the property
  • Undeveloped property (land only)
  • Properties with more than 4 units

Properties that are currently under major construction/renovations: Property must be fully livable, with no safety issues. (Examples: no missing rails from stairs/decks, no open walls with wires showing, missing kitchen appliances/counters, missing bath fixtures or unfinished pool).

  • Additional limitations may apply

Home Equity Line of Credit:

  • This Account has a Draw Period of 10 years, followed by a repayment period of 20 years.
  • If only minimum payments are made during the draw period, the loan balance will not decrease.
  • In Texas, the maximum CLTV available is 80% on owner occupied properties. Additional restrictions apply in Texas, so please ask a representative for details.
  • In all other states, the maximum CLTV is 85% on owner occupied properties and second homes. Additional restrictions or requirements may apply based on application characteristics.
  • Property type of Condo has a maximum CLTV of 80%.
  • The maximum CLTV available is dependent on credit qualification.
  • Rates vary depending on owner occupancy and CLTV and other loan criteria.

Minimum Loan Amount Requirements in all States:

  • For an owner occupied property or second home the minimum loan amount is $25,000 and the maximum amount is $500,000 with a CLTV of 85% or less of the fair market value.

Other terms and conditions apply; call 844-918-4307 to speak with a representative for details. All rates and offers are subject to change without notice. To receive advertised product, you must become a member of PenFed.

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This credit union is federally insured by the National Credit Union Administration. Rates are current as of October 2023 unless otherwise noted and are subject to change.

APY = Annual Percentage Yield
APR = Annual Percentage Rate


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Routing #256078446

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IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party Website that is not a part of Pentagon Federal Credit Union.


The content you are about to view is produced by a third party unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Realty, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Realty, LLC, see the Affiliate Business Arrangement Disclosure.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party Website.


The content you are about to view is produced by a third party website that is unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Title, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Title, LLC, see the Affiliate Business Arrangement Disclosure.


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