Many homeowners think there’s no place like home, but sometimes sprucing it up or making repairs to make it sweeter can be a financial challenge. Whether you need a new roof, want to repave the driveway or would like to remodel the kitchen, a Home Equity Loan (HELOAN) or Home Equity Line of Credit (HELOC) may be a good option to help pay for home improvements.
There are many reasons to choose a HELOC or HELOAN to renovate your home and low rates are just one of the reasons to tap into the equity you have to give your home the love it deserves. Let’s cover the basics to see if this is something to consider.
What is a HELOC and HELOAN and how do they work?
As you pay down the principal balance on your mortgage, you build equity. A HELOC is a variable rate line of credit secured by your home, meaning you are borrowing against the available equity in your home. That equity can provide you with an option for low-cost funds in the form of a credit line. Your house is used as collateral for the line of credit.
HELOC rates are often lower than other types of personal loans—though the rates may depend on your credit score and the equity in your home. Interest rates can be fixed or variable. Typically, you will have a set amount of time to use the available credit. For example, if the loan has a 10-year draw period, you would be able to use the funds over 10 years, but after that time the repayment period would begin and the funds would no longer be available to borrow. Also, payments shift from interest-only to interest plus principal payments when the draw period ends.
A HELOAN is a fixed interest rate loan also secured by your home. The fixed interest rate is consistent for the life of the loan term which means that the monthly payment does not change. The repayment period for HELOANs is typically five to 20 years.
Home Equity Line of Credit
Variable rate line of credit, secured by your home, with the option to borrow only what you need, when you need it, up to your credit limit
Home Equity Loan
A fixed interest rate loan, secured by your home, to finance a specific amount for a definite period of time
Accessing Your Funds
Simply access funds as needed through Online or Mobile Banking or HELOC checks
Receive your funds in one lump sum
Flexible monthly payments during the 10 year draw period; choose between interest only or principal + interest payments
Predictable fixed monthly payments of principal + interest for the life of the loan
Features & Benefits
Features & Benefits
Features & Benefits
Five reasons to use a HELOC or HELOAN
1. Low interest rates: The low interest rate is a major draw—and typically much lower than the rate of a credit card.There are a number of reasons a HELOC or HELOAN could be a great solution to pay for your home renovation or improvement projects.
2. May be tax deductible: Your HELOC may be tax deductible, but you should consult with a tax advisor to review your situation and confirm this is an option.
3. Can be used for many purposes: You can use a HELOC or HELOAN to pay for home repairs, to build an addition, purchase a new furnace or even consolidate debt. It is usually best to reserve the funds for long-term expenses.
4. Easy access to funds: Lakeland Bank offers easy access using online or mobile banking or HELOC checks. You will be able to use funds from this loan or line of credit as needed until the repayment period starts.
5. Advantage Program: Lakeland Bank offers a Home Equity Advantage Program. Borrowers applying for a home equity loan who meet income limitation and property location requirements may be eligible for rate discounts.*
Is a HELOC or HELOAN right for you?
Use our calculator to estimate your borrowing capacity using home equity and ask yourself these key questions if you are considering this type of loan:
Can you make the payments?
Rather than looking at the cost of the interest-only payments due during the HELOC draw period, you need to know what the maximum repayment cost would be if you used the entire loan amount. It’s very important to be realistic about what costs fit into your budget.
Does your renovation improve the value of your home?
Taking out a second mortgage is best suited for improvements that will increase the value of your home. One way to recoup the costs is to use it to pay for something that grows in value, like a remodeling project with a high ROI.
Are your home improvements too expensive to pay off quickly?
A HELOC or HELOAN is a good solution for more expensive repairs or renovations. For example, you need to replace the roof or maybe you want to add a deck and patio. In these cases, a loan or line of credit can be an ideal payment option instead of tapping into your savings or using a high interest-rate credit card.
If you’re considering a HELOC or HELOAN, explore our low-rate options and apply now. Not quite ready to apply? Get started by downloading a HELOC or HELOAN application today and speak with one of our experienced and knowledgeable lenders who are here to guide you through the process at 866-224-1379.
*Eligibility will be determined based on your verified total annual household income and property location when you submit a Home Equity Loan application. Eligible properties must be located within Lakeland Bank’s CRA Assessment Area which includes various counties in New Jersey and New York. For income limits and each covered county, visit the Rates page.