When it rains, it pours: Utilize the equity in your home to stay dry

Published August 22, 2018, by

Saving for a rainy day can be difficult. What if that rainy day comes before you’re ready? Or the rain lasts longer than you expected?

We’ve all faced unexpected medical expenses (even with insurance, it can add up quickly), unplanned car repairs, or even emergency home repairs. Sometimes we find ourselves prepared, but those expenses can drain savings reserves and leave us unprepared for the next emergency.  And let’s face it, those emergencies almost never happen just one at a time… when it rains, it pours.

Having a back-up plan to cover unexpected expenses — or carry you through a difficult time — can be a great addition to your personal savings. But borrowing money just to have funds available can be an expensive venture. If borrowing money is part of your emergency plan, you should look at your options now, before you need money, so you can make the choice that best suits your needs.

For homeowners who have some established equity, a home equity line of credit (HELOC) is frequently the simplest, most economical way to go.

Why choose a HELOC?
A HELOC offers a number of advantages for homeowners that can make it an ideal way to cover emergencies or unexpected expenses:

Lower Interest Rates
Compared to credit cards, a home equity line of credit typically offers a significantly lower interest rate. It’s secured by the equity in your home, so you will find most HELOC interest rates are below 10%, compared to credit card rates that can be as high as 29%.

Higher Loan Amount
Like most secured loans, a HELOC gives you greater borrowing power than an unsecured alternative such as a personal loan or credit card. Having that higher loan amount — even if you don’t need it right away — can offer great peace of mind in an emergency.

Greater Flexibility
Because your HELOC is a revolving line of credit, you can borrow against your available credit in the exact amount you need. Then, as you repay your balance, your available credit increases, making that amount available to you again for future needs. And you can easily access your HELOC by check, funds transfer, or online banking transfer.

Potential Savings
With a HELOC, you can establish a significant line of credit but only use what you need. While a personal installment loan charges you interest on the entire loan amount, a HELOC only charges interest on the outstanding balance. That could mean big interest savings over time.

As you can see, a HELOC offers a number of money-saving advantages over other borrowing options. But how does a HELOC work? It’s pretty simple, actually:

  1. Determine your available equity. Your loan amount is based on the equity in your home. You can estimate your equity by subtracting your mortgage balance from your estimated home value. For example, if you think your home is worth $200,000 and you owe $150,000 on your mortgage, you have approximately $50,000 in equity. Of course, your banker will arrange for an appraisal to get your official home value once you start the application process.
  2. Schedule closing. Once your available equity is determined and your application is approved, your banker will schedule a closing — similar to a mortgage closing, but simpler. At that point, you will have access to your entire HELOC amount, which you can use any time you need it.
  3. Access your funds. You’ll also have minimum monthly payments, but you can repay more than the minimum to reduce your interest expense. There are no prepayment penalties, and the amount you repay is available for you to borrow again as needed.

Financial emergencies can be an enormous source of stress, no matter how prepared we think we are. Having a HELOC already approved and available to cover unexpected expenses can be a stress-free way to weather whatever situations come your way.

To learn more about whether a HELOC is the right option for you to prepare for a rainy day, contact the knowledgeable, supportive team at your local Progress Bank. You can review your home value, estimate your available equity, and review interest rates to determine exactly how much you want to set aside for your peace of mind.

5 signs you should consolidate your debt with a HELOC

Published August 17, 2018, by

Debt is just a fact of life for most of us. The key to using it wisely is to know what you owe, only borrow what you can comfortably repay, and make the right credit choices.

One of the difficult decisions consumers face is whether or not to consolidate debt. Another, of course, is which loan should you use to consolidate that debt.

Here are the top five signs a home equity line of credit (HELOC) might be a good option for your debt consolidation plans:

  1. You own a home with available equity. You can estimate your equity by subtracting your mortgage balance from your estimated home value. For example, if you think your home is worth $200,000 and you owe $150,000 on your mortgage, you have approximately $50,000 in equity. Of course, your banker will arrange for an appraisal to get your official home value once you start the application process.
  2. You have balances on several credit cards. If you are carrying a balance on more than a couple of credit cards, you know what a hassle it can be to remember each card balance, minimum payment, and due date. By consolidating those cards into a HELOC, you have just one monthly payment, but you still have the flexibility of a revolving line of credit.
  3. You want to reduce your monthly payments. Because each credit card has its own minimum monthly payment (usually based on your outstanding balance), your one HELOC payment could be significantly lower. For example, if you have balances totaling $20,000 on credit cards, your minimum payments would be $570 compared to a $484 payment on a HELOC with the same balance.
  4. You want to reduce your total interest paid. Interest on credit card debt can be an endless cycle, particularly if you only make the minimum monthly payment. For this example, though, let’s assume you will pay off your debt in 4 years. If you’re paying double-digit interest on your credit cards, an average HELOC rate of 7.5% APR could save you nearly $5,000 over four years. Imagine what you can buy with $5k (much-needed Caribbean cruise, anyone?).
  5. You have the discipline to keep a zero balance on the cards you pay off. Of course, the key to making debt consolidation work for you is discipline. Once you pay off your credit cards with your HELOC, do your best to leave those accounts at as close to zero as possible. But be sure you leave those accounts open as those low balance accounts can positively impact your credit score.

To learn more about whether a HELOC is the right option for you to consolidate debt, contact the team at Progress Bank. You can review your specific balances and interest rates to determine exactly how much you could save. For more information about how a HELOC can change the game when it comes to debt consolidation, check out Progress Bank’s website.

Got a big tuition payment coming up? Consider a HELOC to fund your child’s future.

Published July 23, 2018, by

If you’re like most consumers, you technically borrow money pretty regularly: You may use a credit card to pay for a dinner out or let your overdraft line of credit cover a particularly large check on the eve of payday.

But borrowing money on a grander scale — complete with application process and closing documents —  can become an intimidating process. Chances are, you’ll spend a little more time deciding if you’re making the right decision, borrowing for the right reason, and making the right loan choice.

Some large purchases come with their own loan options already outlined: you want a car, you get a car loan. Buying a home? You need a mortgage.

Other purchases aren’t always so simple. Let’s say you’re looking to cover tuition at a private school like Altamont School or Alabama School of Fine Arts. Or your little scholar is ready to head off to Samford University. It’s unlikely you will want to put that on a credit card, but a home equity line of credit might be a great alternative.

A home equity line of credit gives you the flexibility to borrow what you need right now — say, this semester’s tuition — and still have access to the rest of the line if you need it. If you own your own home and you have enough equity available, it could be a great solution.

What is a home equity line of credit?
A home equity line of credit is a revolving loan secured by the equity in your home. That means a portion of your credit line becomes available again each time you make a payment, just like a credit card. And because it’s a revolving line, you only pay interest on the portion you use; the rest of your line remains available in case you need it.

How does a HELOC work?
Because it’s a revolving line of credit, your banker can provide you with an approved amount for your credit line. Then, you can access your line using special equity line checks, a card, or even online banking to draw on your credit line. You can use it as easily as you would a credit card or other line of credit. But because it’s secured by your home, the rate can be lower than an unsecured line of credit and in some cases, the interest may be tax deductible.

How much can I borrow?
How much you can borrow will depend on the amount of equity available in your home. You can estimate your potential equity line by subtracting the current balance of your primary mortgage from the appraised value of your home. For example, if you owe $80,000 on a home that’s worth $120,000, you have $40,000 in available equity. Some banks may limit your total loan amount (rather than lending you the full $40,000), so you’ll want to talk to your banker about your specific loan amount.

What’s involved in getting a home equity line of credit?
Once you select a bank and submit your application, the next step will be a home appraisal. Depending on your situation, the bank may use an estimated appraisal based on the value of other homes in your area, or they may prefer to have a professional appraiser visit your home for a complete onsite review. Once your home’s value is determined, your lender will request a payoff amount for your primary mortgage to calculate your available equity. At this point, some banks may allow you to borrow up to 100 percent of your available equity, while others may limit you to as little as 80 percent of the available equity. You’ll want to talk to your lender to be sure.

What’s my next step?
If you decide that a home equity line of credit makes sense for your borrowing needs, your next step is to find a bank you trust, one that can meet your desired time frame for closing and funding. Smaller, local banks like Progress Bank can offer you the benefit of local decision-making for quicker processing in addition to competitive rates. Then, complete an application and get the process started.

  • Of course, school tuition isn’t the only potential use for your home equity line of credit. This revolved credit line is a convenient way to tackle a number of financing needs, including:
  • Major home repairs such as a new roof or HVAC units
  • A remodeling project like kitchen upgrade or a new deck
  • Debt consolidation to lower your interest rate, your monthly payment, or possibly both
  • A once-in-a-lifetime vacation

home equity line of credit can also serve as a convenient emergency fund to cover medical expenses, car repairs, or other unplanned expenses.

Visit Progress Bank to learn more about the borrowing options available to you, including a home equity line of credit. And be sure to ask if you qualify for the special fixed introductory rate. For more information about what the knowledgeable, friendly team at Progress Bank can do for you, visit today!


Looking to up the ante on your home? Try a Home Equity Line of Credit

Published July 12, 2018, by

Across Birmingham, homes are selling like hotcakes. Houses in neighborhoods like Homewood and Vestavia barely have a “For Sale” sign staked in the yard before calls from potential buyers come rolling in. Sweet little three-bedroom, two-bathroom homes get razed only to make room for bigger A-frames with open concept living areas and massive closets. And upon first glance, it seems like if you don’t have the freshest house on the block, there’s no way to compete with the go-go-going of the area unless you have tons of cash to throw around. Do you dream in open concepts? Are the grandbabies coming over so frequently that you feel like you could stand to double your square footage? Before you let dollar signs dash your dreams of upgrading your space, know that there is a way to elevate your home’s look and feel without dropping your savings down to nothing.

Use that equity!
The solution lies in the equity you’ve built in your home. Equity is the difference between the amount you owe on your home and what your home is actually worth. For example, if your home is worth $300k and you owe $150k on your mortgage, you have earned about $150k in equity on your home.

Home equity is a simple solution for funding a home remodeling or home improvement project. It’s actually smart to use your home’s value to borrow money against it so you can put dollars back into your home. After all, those home improvements will likely increase your home’s value, which creates more equity. By using equity to increase your home’s value, you can sometimes use the new equity you’ve created to pay for the old equity you borrowed when you’re ready to sell your home.

A HELOC can help
You can borrow money against your home using a Home Equity Line of Credit (HELOC). Essentially, a HELOC operates like a credit card. Much like a credit card, once the HELOC has been approved, you decide if and when to use the money, and you’re able to withdraw it from the account as needed. Lenders give you a ceiling to which you can borrow; then they charge interest on only the amount used. You can draw funds when you need them — a major perk if your project spans many months. Some programs have a minimum withdrawal, while others have checkbook or credit card access with no minimum. Payments aren’t due until there’s an outstanding balance on the line of credit.

A bit-by-bit fix
Because you tap into the funds only as needed, HELOCs are especially beneficial if you’re looking to upgrade your home little by little. For instance, if you’re planning to remodel one room at a time over the course of several months or years, a HELOC is the perfect way to up the ante on your humble abode. If you anticipate being able to pay back the money in a year or two, a variable rate HELOC can save you money, as the current starting interest rate for borrowers with high credit scores is about one percentage point less than the interest rate for a home equity loan. Keep in mind that a HELOC rate can change over time, so you’ll want to get yours through a reputable financial institution that keeps you in the know about all the terms associated with the line of credit.

Where to go
The best resource for securing a HELOC is a local bank or credit union that offers a competitive interest rate. Currently, Progress Bank has one of the best offers around for a Home Equity Line of Credit. At Progress Bank, once your line of credit is approved, you have a fixed interest rate of just 3.50% for the first year, which means you’ve got a full twelve months with an APR far lower than the national average. In addition to incredible rates, Progress Bank offers a knowledgeable, friendly staff full of local folks who can help determine the best solution to funding your home improvements.

For more information about how you can achieve better-than-brand-new home, reach out to the team at Progress Bank by calling 1-888-513-2288 or click here.