Contact us today and find out how to use the equity in your home to pay for home improvements, buy a new car, take a well-deserved vacation or absolutely anything else you desire! If you are in the market for credit, a home equity plan may be right for you! By using the equity in your home, you may qualify for a sizable amount of credit, available for use when and how you please - and at a lower interest rate. Depending on your specific situation, you may also be allowed to deduct the interest because the debt is secured by your home.*

What is a home equity line of credit?
A home equity line of credit is a form of revolving credit in which your home serves as the collateral. Because your home is most likely your largest asset, you may want to consider using your credit line for larger expenses such as education, home improvements, or medical bills – and not incidental daily expenses.

With a home equity line of credit, you are approved for a specific amount of credit. This is your credit limit or the maximum amount you may borrow at any one time under the plan. To establish a preliminary credit limit, many lenders take a percentage of the home’s appraised value and subtract the balance owed on the existing mortgage. For example:

In determining your actual credit limit, the lender will also consider your ability to repay by looking at your income, debts and other financial obligations, as well as credit history.

With a home equity line of credit program, many lenders will offer a variety of lending plans designed to meet varying member needs. Many home equity line of credit plans set a fixed period during which you can borrow money. This is known as the “draw period.” During this period, you may obtain draws up to your established credit limit. Some plans may require that you borrow a minimum amount each time you draw on the line of credit and that you keep a minimum amount outstanding. (In Texas, any draw must be at least $4,000.) Some plans may also require that you take an initial advance when the line of credit is set up. Typically, you will use special checks to draw on your line of credit. You will also be required to make payments during the draw period, but usually much smaller payments are required than during the repayment period. At the end of the draw period, you will begin the “repayment period.” During the repayment period, you may no longer make draws and your payments will be set in an amount sufficient to pay off the loan at the maturity date or sooner. The terms of the draw and repayment periods will vary according to the different line of credit plans.

Current Texas home equity provisions will apply to the home equity line of credit loans. This means you may only have one home equity loan at a time. You cannot have both a conventional closed end home equity loan and an open end home equity line of credit – you must choose between the two. Also, you cannot make a new home equity loan until at least 12 months pass from the date you closed your most recent home equity loan.

Included below is a Home Equity Plan Checklist. You may want to use this checklist to compare the different home equity line of credit plans and select the one that best fits your needs.

For additional information regarding home equity line of credit loans, please contact a Mortgage Lending Specialist at 903-323-0232 or 800-256-5009 ext. 1232 or email us at mortgagelending@etpcu.org.

*The credit union is not authorized to offer tax advice. Please consult a professional tax advisor regarding the deductibility of interest and charges on real estate loans.

**Qualifications for no closing costs require that property is not taxed as agricultural, satisfactory proof of ownership is provided, tax appraisal is used for valuation, and loan amount is less than $60,000.