Home Equity Line of Credit (HELOC) is a home mortgage loan that works much like credit cards. It allows you to borrow funds up to a certain established credit limit, usually on as needed basis. However unlike credit cards which are unsecured debts, HELOCs are collateralized against your home.
There are several benefits of a HELOC:
- You pay interest only on drawn amount and not the credit limit.
- Low annual fees – usually less than $100.
- Can help you avoid paying private mortgage insurance (PMI).
- Can help you keep the 1st mortgage under the conforming or conforming high balance limit.
- Can increase your borrowing power.
Arcus Lending HELOC Program:We offer both simultaneous close and stand alone HELOCs.
Simultaneous close -We offer up to 89.9% CLTV loan on simultaneous close 2nds. Meaning, even if you have only 10% down payment (while buying a home) or only 10% equity (while refinancing), you can avoid private mortgage insurance (PMI) by taking two loans. A first mortgage for 80% and a second mortgage HELOC for 9.9%. Lets look at an example:
- Purchase price – $450,000
- Down Payment – $50,000
Without a simultaneous close HELOC, your only option is to get one loan for $400,000 and pay mortgage insurance since your downpayment is under 20%. But with our HELOC Loan, we can do the first loan for $360,000 and a HELOC for $40,000 thus avoiding mortgage insurance.
Such loan structure can also be used to get a lower interest rate by staying within the conforming loan limit. Lets look at another example:
- Purchase Price- $900,000
- Downpayment – 20% or $180,000
- Loan Amount – $720,000
If you are in a county where conforming high balance limit is $625,500 you can avoid paying much higher interest rate for a jumbo loan, by getting 2 mortgages – First for $625,500 and the HELOC for $94,500.
Stand-alone HELOC - You can get a stand-alone HELOC either as a 1st mortgage (if your house is free and clear) or as a 2nd mortgage (if you have more than 10% equity in the house). You can use this money for remodeling, paying for child’s tuition fee, vacation, buying a new car, buying another home or anything else that’s important for you.
Contact us to find out current rate and if you qualify for this loan.