HELOC: Home Equity Line of Credit

Sara Swift, with Utah Central Credit Union, breaks down the basics of what a HELOC is and how it can be used effectively.


Currently, Utah Central Credit Union is offering fixed rate HELOCs as low as 5.49%.

Homeowners can obtain a HELOC if the value of their home is greater than their mortgage. For example, if the home is valued at $450,000 and $280,000 is owed – that leaves $170,000 in equity.

HELOCs are an attractive loan option because monthly payments are so low. For example, if a homeowner borrowed $10,000, based on current financial rates, payments would only be $42 a month. In today’s financial world, that’s very cheap money.

Other features of a HELOC:

1. There’s usually no home appraisal or closing costs.

2. Monthly payments are low and cover interest only.

3. There is a long repayment period — usually about 10 years or more.

4. The loan rate on a fixed rate HELOC stays the same throughout the life of the loan.

5. HELOC loans under $100,000 are tax deductible.

6. You only owe on what you borrow -not the full amount of your line of credit. For example, if you’re approved for a $60,000 line of credit but only need $5,000 for a bathroom remodel, that’s all you’ll repay.

HELOC’s are more cost-effective than other types of loans.

For example:

• Signature loan rates right now are as low as 9.75% but the monthly payment would include both interest and principal. This loan has to be paid back within five years.

• Monthly payments on a variable rate HELOC would also include principle and interest. And because the rate is variable payment amounts could go up or down.

• Refund anticipation loans – loans that can be taken out on the money expected from income tax returns – have high interest rates; as high as triple digits on an annualized basis.

For more information, please contact Utah Central Credit Union. They have several branches throughout the state. You can find their contact information at www.utahcentral.com.

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