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How to Decide if a HELOC is Right for You

A home equity line of credit​​ (HELOC) can be a convenient, cost-effective way to borrow money for life's biggest expenses, from home improvements to college tuition.

What is home equity?

Home equity is the difference between what you owe on your mortgage and your home's current value. As you pay off your mortgage over time and your home's value increases, the amount of equity in your home rises.

With a home equity line of credit, you borrow against the equity in your home, turning it into funds you can use right away. Much like a credit card, a HELOC is a revolving line of credit that allows you to borrow against your spending limit as needed. During the draw period you withdraw funds as you need them, and you make monthly installment payments that include principle and interest on the amount borrowed during the repayment period. The draw period and repayment will vary among financial institutions.

When is a HELOC a good option?

Here are some smart ways to use a home equity line of credit:

Make improvements that add value to your home

One of the most common reasons to use a home equity line of credit is to boost your home's value. For example, you could update your kitchen with modern features or turn the basement into a home theater. When you're ready to move, these updates can help your home sell faster or command a higher asking price in the market.

Consolidate debt

Another practical reason to get a HELOC is to consolidate high-interest rate debt. If you're juggling several debts, such as medical debt, student loans or credit card debt, you could save money by rolling them all into a lower-rate HELOC. Plus, you'll enjoy the convenience of one streamlined payment. 

Prepare for emergencies

A big benefit of a home equity line of credit is that you don't have to use the funds right away. When an unexpected expense comes up, you can use part of your HELOC instead of relying on high-interest rate credit cards or tapping into your retirement fund. Knowing you have financial flexibility in an emergency can provide a lot of peace of mind!

Cover education costs

If you have a college-bound student—or if you're thinking about going back to school—a home equity line of credit can help your family achieve the dream of higher education. Many families find that a HELOC can help them cover gaps in funding after financial aid, scholarships and federal aid have been applied. You could use the funds to pay for tuition bills, textbooks, room and board, study abroad programs and other education-related costs.

Is a HELOC right for you?

Whether a HELOC makes sense for you depends on your goals, needs and unique financial situation. You can use the funds from a HELOC for just about anything!

Dream bigger and borrow smarter with WPCU

A Home Equity Line of Credit from Wright-Patt Credit Union (WPCU) is the smarter way to borrow and keep more money in your pocket. From now until March 31st, pay no closing costs* on a WPCU HELOC, plus you'll enjoy no annual fees*, no prepayment penalties*, low interest rates and easy, anytime access to funds.

This line of credit is available for a 15-year period, followed by a 10-year repayment period. If you don't use the funds, you don't pay for them—but you'll have peace of mind knowing they're available when you need them.

Learn more about WPCU's Home Equity Line of Credit or apply today.​

​​*All loan applications are subject to credit review and approval. This is a special, limited time offer providing no closing costs on any new Home Equity Line of Credit Loan application submitted between 2/1/2021 and 3/31/2021. Annual Percentage Rates (APRs) are accurate as of 3/19/2021 and may change at any time. The APR will vary from Prime Rate + 0.00% (currently 4.00% APR) to Prime Rate + 5.50% (currently 8.75% APR), depending upon your creditworthiness and the loan-to-value (LTV). The APR for the Home Equity Line of Credit may increase or decrease quarterly, but it will never fall below 4.00% APR and will never exceed 25.00% APR. The APR is variable, is based upon an index plus a margin, and will be based on the highest Prime Rate (the index) as published in the Wall Street Journal in effect on the last day of each calendar quarter that ends within the billing cycle, currently 3.25%. The term is 25 years, consisting of a 15-year draw period with interest-only payments, followed by a 10-year repayment period with principal + interest payments. Making only the minimum payment each month during the draw period will not reduce principal, and your payments during the repayment period may substantially increase from what you paid during the interest-only period. The amount of savings realized with debt consolidation varies by loan. Since a Home Equity Line of Credit may have a longer term than some of the bills being consolidated, there may not be a savings over the entire life of the line if you make only the minimum payments. Federally guaranteed student loans and other loans with special government benefits should not be consolidated because you may lose the benefits. The property value is based on an approved valuation method determined by Wright-Patt Credit Union. Property must be an owner-occupied single-family residence, duplex, or up to four units, if owner-occupied and is the primary residence of the applicant. Property insurance is required on the property securing the loan, and flood insurance is required when the property is in a flood zone. The minimum credit line is $10,000, and the maximum credit line is $250,000; line amount is dependent on LTV and the borrower's creditworthiness. Consult a tax advisor regarding the deductibility of interest.