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The Flexibility You Need: Benefits of Home Equity Loans and Lines of Credit
- By Meghan Loubier, Skowhegan Savings
As the weather warms up, many of us turn to thoughts of home improvement and how to get the kitchen of our gourmet dreams, build an addition for extended family or send junior to university. Home equity is one way to make these goals a reality.
The difference between any outstanding debt and the property's value is referred to as Home Equity. The remaining property value can be used to guarantee a loan: A Home Equity Loan or Line of Credit.
The Fixed Rate Home Equity Loan is a loan that provides an up-front lump sum payment in exchange for regular repayments for the agreed upon term, and at a set interest rate that remains constant for the life of the loan.
Home Equity Lines of Credit on the other hand, have a variable interest rate tied to the prime rate index, there is no fixed loan amount, though there is a credit maximum and repayment is flexible. We offer a 5-year draw period where funds can be drawn and repaid and payments are based on existing balances and charged interest only. After the five year draw period ends the repayment period begins where remaining balances are paid back over a 15-year term, the interest rate remains variable.
Here are the top 5 benefits to taking advantage of your home's equity now:
1. Interest paid on the loan may be tax deductible, just as it is on your first mortgage.
2. Interest Only Payments - Home Equity Lines of Credit offer interest only payments for the first 5 years. This can be a great option for short term borrowing.
3. Low closing costs - closing costs on a home equity loan are considerably lower than what a borrower would find on a full mortgage refinance.
4. Already have a low rate on your first mortgage but need to access home equity? A home equity loan is a great way to access the equity in your home if you would prefer not to change the rate or term on your existing first mortgage.
5. Funds from the loan can be used for things such as:
a. Debt Consolidation
b. Home Remodeling Projects
c. College Expenses
d. Down Payment on investment property
If you've been thinking about how your home might provide more than a roof over your head, call or stop in to one of our branches today to learn more about special rates, terms and home equity promotions that can help you reach your goals today. | 
