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Is an Interest-Only Home Equity Line of Credit Right For Me?

It’s that time of the year when most people are undertaking renovations to their current home or preparing for major life events (such as sending a kid off to college). When making such a major – and costly – decision, there is so much to consider in finding the right option(s) for you. How much can you afford? What flexibility do you need? What type of lending option fits my needs?

A new trend in mortgage lending is the offering of interest-only home equity lines of credit, or HELOCs. This allows you to borrow against your home’s equity and make payments of interest only for up to 10 years. On the leading edge of credit union mortgage lending, Point Breeze Credit Union has recently introduced an interest-only home equity line of credit product for our members with a low introductory rate of 0.99% APR.

To see if an interest-only home equity line of credit is right for you, we’ve put together a few scenarios to help you make that decision.

I want to maximize my home equity, but need to keep my payments low.

A key feature of an interest-only home equity line of credit is greater flexibility and control over your budget and cash flow. Borrowers can enjoy a low minimum monthly payment by paying only the interest that has accrued, or pay a higher amount toward the principal—as much as your budget will allow—over a 10-year period. This allows you to maximize your home equity while keeping your payments low and flexible.

I’ve had my home equity line of credit for 9 years.

For those with a home equity line nearing the interest-only draw period expiration, this is the best time to switch your existing HELOC and save, before you see a significant increase in your monthly payment. Refinancing your home equity line of credit will allow you to maintain a low minimum payment of interest-only for the next 10 years, and enables you to stay away from expensive points or closing costs. For example, on a $25,000 balance during the 0.99% APR introductory period, the minimum required monthly payment would be only $20.25.

I’m planning for a major remodel this summer, but I don’t want to give up my low interest rate.

Many borrowers have locked in ultralow interest rates in recent years, saving them tons of money. And as home values rise, homeowners are taking advantage of HELOCs to fund remodels, upgrades and other major home projects. An interest-only home equity line of credit allows you to borrow against your home’s equity without giving up your low interest rate.

If an interest-only home equity line of credit seems like the right fit for you or you want more information, call a loan officer (at 410.584.7228) today to schedule an appointment.

*APR=Annual Percentage Rate. Rate, terms and conditions are subject to change without notice. Actual rate may vary based on term, loan amount, credit history and other factors. 10-year draw, 10-year payback. The APR in effect after the expiration of the introductory rate is based on the value of an index. The index is the Prime Rate and is published in the Wall Street Journal. The introductory rate is for the first 6 months, after which the rate will adjust to the Prime Rate with a floor of 3.25% APR. Thereafter the rate will adjust annually on the anniversary date of the loan to the Prime Rate. Rate ceiling is 8.25% APR. You may pay only the interest on the money you borrow for 10 years from the date the loan is established (draw period). Minimum payment will not repay principal, which will result in your payment increasing at the end of the 10-year draw period. Minimum loan amount is $7,500. Maximum loan amount is up to 80% loan-to-value or $250,000. We may not extend credit to you if you do not meet Point Breeze Credit Union criteria. Excludes current Point Breeze Credit Union loans. For every $1,000 borrowed at .99% APR your payment will be $0.81. For every $1,000 borrowed at the current rate of 3.25% APR your payment will be $2.67. Consult with your financial advisor about potential tax savings. Please consult with a Point Breeze loan officer for more information on a Point Breeze Credit Union Interest-Only Home Equity Line of Credit.