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MORTGAGE KNOWLEDGE CENTER

PenFed Mortgage with Confidence

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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. Most Popular Uses of a HELOC

MORTGAGE

Most Popular Uses of a HELOC

What you'll learn: Learn about all the different ways HELOCs can be used.

EXPECTED READ TIME: 3 MINUTES

July 3, 2023

Most Popular Uses of a HELOC

Are you ready to use the equity of your home as collateral with a Home Equity Line of Credit (HELOC)? A HELOC can be a great way to tap into the equity in your home and pay off debt, home renovations, a vacation, or even medical bills. Secured against the value of your home, a HELOC is a line of credit you can gather funds from and repay over an amount of time. Here are some of the best uses for a HELOC and how to decide if this loan is right for your circumstances.

What are some of the best ways to use my HELOC funds?

While there are many ways to use your HELOC funds, many may not be tax deductible. Typically, the only funds that are tax deductible are those used to make major home improvements. Keep this in mind as you calculate if a HELOC makes the most sense for your current financial situation. Consult a tax adviser for further information regarding the deductibility of interest and charges.

  • Home Improvements

Increase the value of your home by using funds to make substantial improvements to your home including, new room additions, a swimming pool, electrical wiring and more.

  • Education Expenses

Pay off student loans or help your children attend the school they always dreamed of. 

  • Debt Consolidation

Are you losing money by racking up high interest rates every year? Use your HELOC to pay off your credit card balances. 

  • Emergency Expenses

Sometimes, life just happens. With a HELOC you can have quick access to cash if an unexpected life event happens like a medical emergency, funeral, or home damage.

  • Real Estate Down Payment

Use your funds as a down payment on a rental property or a second home.

  • Business Expenses

Random expenses may pop up when starting a new business. You can use a HELOC to pay for new equipment and business supplies.

  • Retirement

Taking inventory of your current living situation as you approach retirement is encouraged. You may need to make modifications to your space for physical needs and a quick line of cash can help.

Are there any expenses I shouldn’t pay with HELOC funds?

While the funds from a HELOC can come in handy, we don’t recommend treating your home like an unlimited piggy bank. We know you are a responsible homeowner, which is why we want to share with you some instances where a HELOC would not make the most financial sense.

  • Paying for a vacation

It's not a good idea to use a HELOC to fund trivial things like a vacation or a new car. If you fail to make payments, you could lose your house to foreclosure.

  • Paying for a special event

Using a HELOC to fund your child’s wedding can offer a more competitive interest rate than a credit card, but the repayment timeline on your loan will also extend. It is best to set aside money over time to pay for these types of expenses with cash.

  • Building Credit

Opening a HELOC to build credit doesn’t make financial sense if you already use your credit card responsibly and make timely payments.

What else should I consider before using HELOC funds?

When making a significant financial decision like opening a HELOC, calculating the fees, loan terms, and impact on your monthly budget is important. Here are some other factors to consider to determine if a HELOC is right for you.

Pros

  • If you intend to make a high-cost purchase that you do not plan to pay back right away, a HELOC will save you more money on interest than a credit card.

  • A HELOC is a flexible option that allows you to borrow money when necessary. This makes it a great choice if you need access to ongoing funding.

Cons

  • Typically, a HELOC has a variable interest rate which means the interest rate is not locked in and is unpredictable. A fluctuating interest rate could impact your monthly mortgage payments.
  • While HELOCs can provide you with access to significant funds, it’s important to remember it’s not free money. After the HELOC draw period ends, your new principal and interest payments will be combined into one fixed monthly payment.

Still have questions?

There are many cases where a HELOC can provide a smart way to leverage the equity in your home to achieve other financial goals or pay for large expenses. However, a HELOC also requires discipline, budgeting, and financial tracking. Speak to your loan originator to crunch the numbers and ensure this is the most cost-effective and responsible financial option for you. 

For more information about PenFed Mortgages:
 

PenFed Mortgage: 

800-970-7766

Get Started

SIMILAR ARTICLES

How Much Equity Do I Need for a HELOC? | PenFed Credit Union

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

Couple calculating a budget together.

Personal Loan vs. HELOC: Which Is Right For You? | PenFed Credit Union

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.

Couple looking over documents

HELOCs & Home Equity Loans – Top FAQs | PenFed Credit Union

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.

files and binder on a desk

What Is a Home Equity Loan? | PenFed Credit Union

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.

Houses in neighborhood
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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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