Colder weather is a great time to think about home renovations. Here’s why a home equity line of credit might be the best way to finance those projects.
Getting your home ready for winter takes plenty of planning, but sometimes the costs of such large-scale projects can be high. With a home equity line of credit (HELOC), you can get the funding you need with the flexibility to repay only on what you borrow - at a lower interest rate.
For several reasons, it's an ideal time to use your HELOC for your next big home improvement project. Here's a list of some top considerations.
1. Rising interest rates
With a healthy economy and the Fed expected to raise rates again before the end of 2018, taking a fixed-rate advance on your BECU HELOC can save you money on repayments if the rate increases. A HELOC is unique in that it's an "open-end loan", but did you know you have an option to lock in a fixed rate on amounts more than $5,000? A fixed rate means you won't have to worry if the Fed does raise rates again. Learn more about how a fixed-rate advance can benefit you.
2. Pay back only what you borrow
Whereas a home equity loan is one lump sum, a HELOC is an open-end loan and gives you the flexibility to borrow only what you need. For example, if you take out a HELOC of $50,000 and only need $20,000 of it for your project, you can use the remaining balance as a source of additional funds for a new home project or for another purpose, such as debt consolidation. You can continue to borrow, pay down, and borrow again during your draw period.
3. Taking advantage of offseason contractor costs
Winter is definitely the offseason for contractors. You can capitalize on that by starting your home improvement project at the beginning of the season. Contractors may charge less for any services they provide, there will likely be more availability of contactors, and there's a good chance you'll pay less for the cost of materials and equipment as well.
4. Long draw and repayment periods
HELOCs from BECU feature a 10-year draw period and 15-year repayment period. During the draw period, you can take the option of only making payments on the loan's interest (with a minimum payment of at least $100). However, making payments on both the principal and interest before the 10-year draw period ends will help you avoid a sudden increase in your monthly payment. Read about this in more detail on our HELOC page.
If you're a homeowner with an existing HELOC, or thinking about opening a HELOC, we've got a solution for you. Get started by visiting a BECU Neighborhood Financial Center, applying online (or logging into online banking to make a draw on an existing HELOC), or by giving us a call at 800.233.2328.
*The rate for the Home Equity Line of Credit (HELOC) is based on the highest Prime Rate as published in the Wall Street Journal as of the date of any rate adjustment plus a margin. Rates currently range from 5.49% to 10.99% as of 10/1/2018. The actual rate may be higher than the advertised rate for loans exceeding 70% combined-loan-to-value (CLTV), non-primary residency, or if you have lesser creditworthiness. Not every applicant will qualify. APRs do not include costs and rate may vary monthly (maximum 18% APR).During the credit advance draw period, payments equal monthly payments of interest, subject to lesser of $100 or your balance and principal is not reduced. At the end of the draw period, your monthly payment will increase equal to the principal and interest amount necessary to pay the loan balance over the remainder of the loan term amortized over 180 months. APR for a Fixed Rate Advance (FRA) as of 10/1/2018 ranges from as low as 5.74% to 11.24% and is determined at the time the FRA is established. FRAs provide for up to 15 years of fixed monthly principal and interest payments, depending on the amount advanced. FRAs are subaccounts of a HELOC. Primary residence and Second Home/Vacation Home property must be located in one of the following states: WA, OR, CA, AZ, KS, MO, IL, PA, ID and SC. Rental/Investment property must be located in the State of Washington. In normal circumstances, you will not have to pay any fees in order to open a HELOC, but insurance to protect the property against hazards (including flood insurance, if applicable) is required. Borrower is also required to pay for optional services (e.g. if borrower retains an attorney that borrower is not required to use). In South Carolina, where the law requires use of an attorney, BECU will be solely responsible for paying all attorneys fees and costs necessary to open the HELOC, and will perform this responsibility fully by paying all reasonable attorneys fees and costs related specifically to the closing based on rates typically charged by attorneys in the local market for the closing of similar HELOC transactions. Additional state or local mortgage fees or taxes may apply. An Automated Value Model (AVM) may be obtained in lieu of an appraisal at no cost to member. All loan programs are subject to change without notice. Loans are subject to credit approval and other underwriting. Reconveyance fee applies when refinancing or paying off a BECU Home Equity Line of Credit or BECU Home Equity Loan.