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A raccoon mascot and a girl laughing in a playhouse on a HELOC blog

Dreaming of a home renovation but you don’t have the funds to do it? Home Equity Lines of Credit (HELOCs) are popular among homeowners for their flexibility and potential to unlock financial possibilities. Whether you’re considering adding a fancy new deck to your home or consolidating your debts, HELOCs can help you tap into your home’s equity. This guide will walk you through everything you need to know about HELOCs, their benefits, and how White River Credit Union can assist you.

What is a HELOC?

A HELOC is a credit line secured by the equity in your home. This allows you to borrow money as needed up to a certain limit, repay it, and borrow again, much like a credit card. HELOCs are typically divided into two phases: the draw and repayment periods. During the draw period, which usually lasts 5-10 years, you can borrow funds and make interest-only payments. After this, the repayment period begins, typically lasting 10-20 years, where you repay the principal and interest. 

Benefits of a HELOC

Your home is like a treasure chest of opportunities, and you have the key to achieving your dreams. HELOCs offer several advantages that make them an appealing option for homeowners:

  • Flexibility: Borrow only what you need when you need it. This flexibility is ideal for projects with uncertain costs or ongoing expenses.
  • Lower interest rates: HELOC rates are typically lower than credit card and personal loan rates, making them a cost-effective borrowing option.
  • Tax-deductible interest: Interest paid on a HELOC may be tax-deductible if used for home improvements, but always consult your tax advisor for details.
  • Versatile use of funds: Use the funds for various needs, from home improvements to emergency expenses.
  • Increased property value: Improvements made using a HELOC can enhance your home’s value, benefiting you in the long run.

When you can use a HELOC

HELOCs are incredibly versatile, making them suitable for various financial needs. Here are some common scenarios where a HELOC can be your best friend:

  • Home improvements: Jane used her HELOC to renovate her outdated kitchen, adding modern appliances and increasing her home’s value.
  • Debt consolidation: Mike consolidated his credit card debts into a single, lower-interest HELOC, reducing his monthly payments and saving on interest.
  • Emergency funds: The Smiths used their HELOC to cover medical bills after an unexpected surgery, avoiding the high costs and interest rates of personal loans.
  • Investment properties: Garrett obtained a HELOC, so he has funds to purchase an investment property if one becomes available. With the HELOC, his funds are ready for when he needs them. He doesn’t have to waste time with the application process and risk losing the property he wants to purchase.

HELOC vs. Home Equity Loan vs. Refinancing

Understanding when to use a HELOC compared to other financing options is crucial. A HELOC is best for ongoing expenses or projects that require flexibility. It’s similar to a Home Equity Loan in that you are borrowing money against your home, but with a HELOC, you have a certain amount of money available to borrow and pay back. Think of it like a credit card. This can be perfect for a home improvement project with flexible costs.

Alternatively, a Home Equity Loan has a fixed interest rate, keeping monthly payments consistent. If you are creating a budget, this is ideal. One-time expenses where you need a lump sum, like paying for a wedding or a large medical bill, are situations where you should consider a Home Equity Loan. Learn more about the difference between a HELOC and a Home Equity Loan here.

Finally, refinancing is great when you want to lower your mortgage rate or change your loan terms. For example, refinance to a lower interest rate to reduce monthly payments or switch from an adjustable-rate mortgage to a fixed-rate mortgage for stability.

Application process for a HELOC

Applying for a Home Equity Line of Credit through White River Credit Union is straightforward and easy for our members. Here’s how to apply for a HELOC from WRCU:

  • First, visit our Home Equity Line of Credit (HELOC) page to learn more about this popular option.
  • Then, you can apply via the following options:
    • Schedule an appointment with one of our team members.
    • Call (360) 825-4833 ext. 4 to talk to someone in our loan department.
    • Stop by our branch! We are happy to walk you through the application process step-by-step.

HELOC repayment process

Repaying your HELOC responsibly is key to maintaining financial health. Here are some helpful tips to ensure it goes as smoothly as possible:

  • Create a budget: Plan your monthly payments and stick to your budget. Consider using budgeting apps or consulting with one of our financial counselors at WRCU.
  • Avoid over-borrowing: Only borrow what you can comfortably repay. It’s easy to get carried away, so always consider your repayment capacity.
  • Monitor your spending: Track your HELOC usage and repayments. Review your statements regularly and monitor interest rate changes.

Our financial counselors at WRCU can help you create a repayment plan tailored to your budget and financial goals. We offer personalized advice to ensure you manage your HELOC effectively and avoid financial pitfalls.

How WRCU can help you with your HELOC

At White River Credit Union, we’re more than just a financial institution – we’re your neighbors, dedicated to helping you thrive. Schedule a consultation today to explore how a HELOC can benefit you. Our team is ready to provide the guidance and support you need every step of the way. You can also text “Hello” to (360) 663-5974, call us at (360) 825-4833 ext. 4, or email to speak with a member of our loans department. And as always, swing by our office in Enumclaw for questions, concerns, or just a cup of coffee!

© 2020 White River Credit Union