A Primer on Home Equity Programs

April 9, 2019

A home equity loan or line of credit allows homeowners to borrow money against the equity in the home - that is, the difference between the fair market value of the property and the amount owed on all liens on the property.

Jennifer Glaser, RSI Bank’s Processing Supervisor & Underwriter, provides some insight into home equity loans and lines of credit offered by RSI Bank.

What are the common purposes of home equity loans and lines of credit?
Homeowners often use the equity in their home for purposes like consolidating debt, financing the purchase of a vehicle, making home improvements, or paying for college education or a child’s wedding.

What is the difference between a home equity loan and a home equity line of credit (HELOC)?
A home equity loan is a fixed-rate installment loan offering a constant payment for the life of the loan. The amount borrowed is established at the time of the loan and payments are made against the balance at a fixed interest rate over the term of the loan.

A line of credit is similar to a credit card, in that there is a credit limit against which the homeowner may draw. The interest rate is adjustable, meaning it fluctuates according to movements in an index rate, and the payment varies based on the drawn balance.

Additionally, the line of credit offers a five-year draw period during which an interest-only payment is required. Following the five-year draw period, a ten-year payback period requires the remaining balance be paid in principal and interest payments. During the ten-year payback period, the homeowner no longer has access to draw the funds against the line of credit.

What is the difference between a fixed rate home equity loan and refinancing an existing mortgage with cash out? Why might a homeowner consider one over the other?
A fixed rate home equity loan offers homeowners a ‘lower closing costs’ option than does a refinance transaction. Home equity loans have lower loan amount limits and often have higher interest rates. A discounted rate is offered on fixed rate home equity loans when the payment is automatically debited from a checking account at RSI Bank for the life of the loan.

RSI Bank’s online mortgage calculators may be helpful when comparing loan options.
 
What are some parameters for a HELOC or Home Equity loan from RSI Bank?
RSI Bank offers home equity loans and lines for up to 75% of the equity in the home (maximum loan amount of $200,000) based on qualification. The collateral for the home equity loan/line can generally be your primary or secondary residence. *

Are there closing costs associated with a HELOC or Home Equity Loan from RSI Bank?
The fixed home equity loan program offers homeowners a reduced closing costs option with fees typically under $1,000. The line of credit program offers homeowners a ‘no closing costs’ option, with all fees paid by RSI Bank.
 
* Offers are available in New Jersey only. Certain restrictions may apply. Speak with an RSI Bank Lending Representative for further details.
 

Contact us to learn more about RSI Bank’s Home Equity programs.

The information provided in this article is meant for educational purposes only and is not advice. Please speak with a Lending Representative for specific details on RSI Bank’s mortgage programs, home equity loans and lines of credit.

Institution NMLS# 409467 |Jennifer Glaser NMLS# 412627