How Do HELOCs Work?
Looking for a Home Equity Line of Credit (HELOC) in Berks County, PA? Bellco Federal Credit Union can answer your questions about how HELOCs work and help you accomplish your goals.
Bellco FCU is a member-owned, not-for-profit federal credit union. Since 1938, we have provided unique financial products and services to individuals in Berks County, including HELOCs, traditional Home Equity Loans, fixed-rate mortgages, mortgage refinancing and more.
If you live, work, worship, or attend school in Berks County, you are eligible for membership in Bellco FCU. We know you’ll love our personalized service, better rates on loans and credit cards, and the ability to save hundreds of dollars on fees.
How Does a Home Equity Line of Credit Work?
A HELOC gives you access to a line of credit with a set limit, somewhat like a credit card. The amount of the loan is determined based on the appraised value of your home, minus the balance due on your mortgage.
Once your loan application is approved, a specified amount of revolving credit is made available to you for a limited time period (typically 5 or 10 years).
During what is called a “draw period,” you can withdraw funds from the line of credit as you need them. As you pay off the principal, your credit revolves, and you can use it again and again for the duration of the draw period.
In comparison to other loans that use the equity in your home as collateral, a HELOC offers a variety of benefits:
Draw out only what you need, when you need it
Pay interest only on the amounts you withdraw
Multiple draw options include checks, online access, telephone access and branch access
Repay the principal and reuse the funds over and over again during the draw period
Use it for periodic expenses, such as emergency funds, debt consolidation, tuition, and home improvements
Local, Pennsylvania decision-making and processing
Attentive, friendly service from start to finish
Bellco Loan Protection is available
HELOC Alternatives
A traditional Home Equity Loan may be a better option if you need the funds in a lump sum. Because your interest rate on this loan (also called a “second mortgage”) will be fixed, creating a budget is easier and more predictable. You won’t have to worry about your payment increasing due to changing interest rates.
Another alternative is to refinance your first mortgage and withdraw some or all of the equity in a lump sum. This involves exchanging your existing mortgage for a new mortgage. If you have enough equity in your home for the funds you need, this can be a great way to avoid making two payments every month. Bellco FCU also offers home mortgages with varying loan terms.
To find out more about how HELOCs work and learn about the advantages and disadvantages, contact Bellco FCU today. We have the tools, information and expertise to help you make the right decisions.