Home Equity – FAQs

FAQs: Fixed Home Equity Loan

Q. What exactly is a Fixed Home Equity Loan?

A. Commonly known as a second mortgage loan, an Educational Community Alliance Credit Union Equity Cash Loan provides a specifically requested amount of cash that is to be paid back over a specific period of time. The amount you borrow is secured by the equity you have in your home.

Q. What is the maximum amount I may borrow?

A. If approved, a member may borrow up to $250,000. The minimum amount that can be loaned under the equity cash plan is $5,000. The maximum amount of your Fixed Home Equity Loan will be determined by your ability to repay, credit history and 90% of your home’s appraised value, less any outstanding mortgage balance.

Q. How is the amount I may borrow determined?

A. The credit union orders an appraisal of your home by a certified appraiser. The appraised value is multiplied by 90%. From this figure, any outstanding mortgages you have on the home are subtracted. The resulting figure is the maximum amount for which you may apply. Your application is then evaluated on various credit criteria and your ability to repay the loan at the risk based interest rate being charged.

Q. Are there any fees involved with applying for and receiving an Fixed Home Equity Loan?

A. A application fee is $125 and is currently refunded at the time of closing. If the loan is paid off within 3 years or less you will be charged for the original cost to secure the necessary title verification and appraisal of your home, and any recording fees, which is approximately $300.

FAQs: Flexible Home Equity Line Of Credit

Q. What exactly is an Flexible Home Equity Line-of-Credit Loan (HELOC)?

A. A Flexible HELOC Loan provides you with an approved line-of-credit secured by the equity you have in your home.

Q. How does it work?

A. It’s simple. Once you are approved for an Flexible Home Equity Line-of-Credit Loans, you will receive a book of checks, much like the checks you use with your regular checking account. The only difference is that you’re actually

writing yourself a loan when you sign your name to a Flexible Home Equity Line-of-Credit Equity check.

Q. What is the maximum amount that may be obtained with a Flexible HELOC Loan?

A. If approved, a member may borrow up to his or her authorized line-of-credit, not exceeding $250,000. The minimum amount for a credit line is $5,000.

Q. How is the line-of-credit determined?

A. An appraisal is requested on your home by a certified appraiser. The value is multiplied by 90% less any current mortgage loans. The authorized credit limit will also be based on the individual’s credit history and ability to repay at the current rate.

Q. Are there any fees involved with applying for and receiving a Flexible HELOC Loan?

A. A $125.00 application fee is due upfront and is refunded at closing. If, however, you payoff and close your loan within the first 3 years after it is opened you are required to pay back the actual closing costs. The closing costs are generally around $300, used to secure the necessary title verification and appraisal of your home, and to pay recording fees.

Q. How can I repay the loan?

A. You can write checks against your Flexible HELOC Loan for five years. This is called the “draw period.”

During the draw period, low minimum monthly payments of $100 or a percentage of the total outstanding balance on your account, whichever is greater, are required. As your balance declines, your available credit use will increase.

Q.What if my loan is not paid off after the five year draw period?

A. Generally, your loan will not be paid off during the first five years. At the end of the draw period, your loan will be set up like a conventional loan with a definite repayment period depending on the balance of your loan. Your payment will be set to repay the balance at the current rate in effect as of the first day of the repayment period, and could change as the APR increases or decreases.

Q.What is the interest rate and how is it determined?

A. The annual percentage rate (APR) is variable and can be adjusted quarterly. We start with an independent index (“the index”) which is The Wall Street Journal prime rate. The rate charged on your loan will be the prime rate plus a fixed

margin.

Q. How will I know what my available credit line and monthly payments are?

A. You will receive a monthly statement detailing all activity as long as you have a balance on your Flexible Home Equity Line-of-Credit Loan. It will reflect the current rate, along with the payment required.