About Home Equity Lines

understanding the product features or home equity lines

Home equity lines are credit lines where you advance yourself funds when and as you need. Rates are variable. Lines are generally open for 5-10 years.

Below are four (4) quick summary features of home equity lines:

Page Topics:

equity line product features

Works Like a Credit Line

You will receive "equity line" checks that that can be used to advance yourself a loan up to your approved available balance.

Simply write the loan amount you need and deposit it into your money account (or make an online transfer using your bank online banking).

No Checks to Vendors

Don't write equity checks to a vendor. Always deposit line advances to your money account. You don't want your equity line checks floating through the clearing system.

Simply advance yourself money from your equity line and deposit it into your regular money checking account. Then use your checking account to pay the vendor.

Note that these checks can be used by others, so keep them protected in your home. Never carry these checks with you.

equity line product features

Credit Card Access

Some lenders will also provide credit card access to your equity line account. You can use it like a credit card, where all transactions will be posted to your equity line account.

We note caution: even though your account is protected against fraudulent use, the last thing you need is having your home exposed to potential fraud in the event you lose or someone obtains access to your equity credit card.

We recommend that you refuse the card that is tied to your home equity line account. Instead, use the standard credit card to pay for purchases — find a credit card that offers rebate programs. You will pick up the 25-grace period and then when the payment is due, you your equity line to payoff the credit card.

equity line product features

Equity Line Rates are Variable

Equity line rates are variable and indexed to the PRIME RATE or other rate index:

This means that your rate can increase or decrease whenever the PRIME RATE changes. The rate (APR) is calculated by taking an margin (percentage) and adding it to the PRIME RATE.

The interest (APR) that will be charged to your account will be only on the amount you actually use, not on the total amount of your credit line.

All home equity line accounts must list the rate cap. This cap may vary by state.

equity line product features

Repayment Terms

Repayment terms for home equity lines may include one of the following plans:

  • interest only payments plus any penalty-related fees,
  • repayment percentage of the principal plus interest and any penalty-related fees

    Example: your minimum payment may be 0.5% of the principal balance divided by 12 plus interest and any penalty-related fees.

Minimum principal payments are not designed to payoff the credit line. You will be required to pay off the credit line when your draw periods ends.

During your draw period, you should be able to pay down your equity line account at any time without prepayment penalties. If no, find another lender.