Home equity loan | blog.firstffcu.com

Accessing the equity in your home can provide financial flexibility, whether you’re looking to fund renovations, consolidate debt, or cover unexpected expenses. However, with such a significant financial decision – it’s essential to make informed choices that protect your long-term stability. Home equity products like loans and lines of credit (HELOCs) offer great benefits, but they should be approached carefully to avoid potential pitfalls. Below are key tips to help you navigate the process.

Do: Understand the Product That Suits Your Needs

When using your home equity, it’s helpful to know whether a home equity loan or a HELOC is the better option. A home equity loan offers a lump sum of money with a fixed interest rate, making it easier to manage predictable, long-term expenses. A HELOC on the other hand, functions more like a credit line – with variable interest rates and the flexibility to borrow as needed. Choosing the right product depends on the nature of your financial goals.

Don’t: Apply for Additional Credit Before Accessing Equity

If you’re considering applying for a home equity loan or HELOC, avoid applying for other loans or credit cards during the process. Opening new accounts can affect your credit score and impact your ability to get the best rates on your home equity product. Additionally, taking on more debt can increase your debt-to-income ratio (DTI), making you a less favorable candidate for a loan.

Do: Research Lenders for Competitive Rates

Just like with any loan, it’s beneficial to shop around and compare lenders before committing to a home equity product. Interest rates, terms, and fees can vary widely between institutions, so it’s a smart move to gather multiple quotes. Even a small difference in the interest rate can result in substantial savings over the life of the loan. First Financial Home Equity Loans offer great rates, no pre-payment penalty, no application fees, no points or closing costs, flexible terms up to 20 years, and fixed monthly payments.*

Don’t: Make Large Purchases or Increase Your Spending

In the lead-up to applying for a home equity loan or HELOC, it’s wise to hold off on making large purchases or racking up credit card debt. Increased spending can lower your credit score and increase your DTI, hurting your chances of getting approved for the loan or resulting in higher interest rates. It’s best to keep your finances as steady as possible during this time. Consider creating a budget to curb unnecessary spending and demonstrate strong financial discipline.

Do: Use Home Equity for Value Enhancing Projects

One of the most responsible ways to use home equity is to invest in home improvements that can enhance the value of your property. Renovations such as kitchen upgrades, bathroom remodels, or energy-efficient improvements not only improve your living space – but can also increase the market value of your home, ultimately boosting your overall equity.

Don’t: Neglect Regular Payments or Change Your Employment

Consistency is key when applying for a home equity loan or HELOC. Make sure all your payments—whether for your mortgage or other loans, are made on time. Missed or late payments can hurt your credit score and jeopardize your chances of getting favorable terms.

If you’re considering a job change, it’s a good idea to delay the switch until after your loan is secured. Changing jobs or reducing your work hours may make you seem like a less stable borrower.

Do: Maintain an Emergency Fund

Before you dip into your home equity, ensure you have a solid emergency fund. Accessing home equity means using your home as collateral, so if you’re unable to make your payments, there’s a risk of losing your home. A financial cushion helps prevent the need to use home equity for smaller, unexpected expenses.

Successfully & Responsibly Access Your Home Equity with First Financial

Home equity can be a valuable financial resource, but it should be used with care. By making informed decisions and avoiding common mistakes, you can maximize the benefits of your home equity while protecting your financial future. At First Financial, we’re here to guide you through the process and help you make the best decisions for your needs.

For personalized advice or more information on home equity options, call 732.312.1500 option 4, or visit a branch today. Be sure to subscribe to the First Scoop blog for ongoing tips and insights into managing your finances.

*First Financial FCU (FFFCU) will waive closing costs at inception of loan. If loan is terminated within the first 2 years of opening, closing cost waiver is revoked and the borrower(s) will be required to pay back closing costs in full to FFFCU. A First Financial membership is required to obtain a Home Equity Loan, and is open to anyone who lives, works, worships, volunteers or attends school in Monmouth or Ocean Counties. See FFFCU for details or visit firstffcu.com for all current rates. Rates for financing up to 80% of Appraised Value less other Mortgages.

Navigating the financial world can sometimes feel like solving a puzzle. As your financial partner, we want to break it down into simpler terms so you feel empowered with your financial decisions. Many of us have homes, and these homes can be a treasure trove when it comes to financial solutions. Let’s chat about two key ways to harness this potential: Home Equity Loans and Home Equity Lines of Credit (HELOCs).

Home Equity Loans vs. HELOCs: A Quick Breakdown

Both of these options revolve around tapping into your home’s value – that’s the difference between what your home’s worth now and what you owe on your mortgage.

Home Equity Loans: Think of this as a one-time deal. You get a lump sum of money and pay it back in fixed installments. The interest rate? It stays the same for the life of the loan.

HELOCs: Picture this like a credit card, but tied to your home’s value. You can borrow money when you need it and repay it. However, the interest rate can change over time and is variable since it is tied to Prime Rate.

While both can be handy tools for homeowners for things like paying for renovations, consolidating debt, and to help pay college tuition – it’s essential to remember that since your home backs these options, there can be a lot at stake.

How Credit Unions Can Help

It’s no secret that the housing market’s been a bit of a roller-coaster lately, but credit unions are standing strong – ready to help you navigate. We’re here not just to offer financial help, but also to give you the lowdown on the best choices for your situation.

Home equity loans have become a hot topic. They offer homeowners a chance to tackle various financial needs, especially in these unpredictable times. With household debt on the rise, HELOCs are emerging as a lifeline for many and can offer a cushion against economic bumps.

The heart of our mission here at First Financial is to keep you informed. We want you to know all the ways you can use the equity in your home. We’ve made it more convenient than ever to explore your options. Gone are the days of endless paperwork and waiting weeks for loan approvals. Visit us on the web to apply online, 24/7.

Home Equity Loans and HELOCs are tools that can open doors to financial flexibility. And credit unions? We’re your friendly guide. With a mix of education, technology, and our unwavering commitment to you – we’re here to empower your financial journey.

To learn more about your Home Equity Loan* or HELOC** options as a First Financial member, call 732.312.1500 Option 4 or visit one of our branches.

*First Financial FCU (FFFCU) will waive Home Equity Loan closing costs at inception of loan. If loan is terminated within the first 2 years of opening, closing cost waiver is revoked and the borrower(s) will be required to pay back closing costs in full to FFFCU. A First Financial membership is required to obtain a Home Equity Loan, and is open to anyone who lives, works, worships, volunteers or attends school in Monmouth or Ocean Counties. See FFFCU for details or visit firstffcu.com for all current rates. Home Equity Loan rates for financing up to 80% of appraised value less other mortgages.

**Home Equity Line of Credit LTV up to 70%. LTV= Loan to Value Ratio. Rates will vary with the market based on Prime Rate and may change quarterly. Subject to credit approval. Available on primary or secondary homes only. A First Financial membership is required to obtain a home equity line of credit, and is open to anyone who lives, works, worships, volunteers or attends school in Monmouth or Ocean Counties. Subject to underwriting guidelines. See credit union for details.