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What is a Home Equity Line of Credit?

A Home Equity Line of Credit (HELOC) works like a credit card, in that you have a “revolving” dollar amount that can be used to purchase whatever you desire, as often as you wish. The interest rate is substantially lower than the interest rate on personal loans or credit cards, and the payments are generally lower.

Essentially, you can use a HELOC for whatever you want, but most people use it for home-related expenses, like remodeling or major repairs. In some cases, you may be able to deduct the interest you pay. It’s best to consult a Tax Accountant or Attorney to determine if you qualify.

Another common use of a HELOC is bill consolidation. A HELOC is a great way to lower your monthly payments and pay off your debts much faster.

You can apply for a Central Credit Union HELOC even if your mortgage is at another financial institution.

Loan-to-Value Requirements

To apply for a Home Equity Line of Credit the value of your home must be at least 20% more than your current mortgage balance. This is called an 80% Loan-to-Value (LTV). It means that your mortgage balance is 80% of your home’s value. The lower your LTV, the more equity you have and the more you can potentially borrow. The official value of your home will be determined by a Licensed Home Appraiser when you apply for your loan.

Your home’s equity increases as you pay down your mortgage balance and as the value of your home increases.

Determining Your Loan-to-Value

To calculate your LTV, divide the mortgage balance by the value of your home.

Example: Assume your home is worth $200,000 and your mortgage balance is $160,000. That means that you have an LTV of 80% ($160,000 / $200,000) and $40,000 in home equity.

How long do I have to own my home before I can apply for a Home Equity Line of Credit?

There isn’t a certain time frame for owning your home before you can apply for a Home Equity Line of Credit. It’s a matter of when you will have enough equity in your home. If you are putting 20% down when you purchase your home, you may be able to apply for a HELOC at the same time you apply for your mortgage.  Many people like to do this so that they can begin to make improvements to their home as soon as they move in.

Home Equity Line of Credit Rates

Effective as of April 25, 2019
Term12 Month Introductory Rate
Fixed APR*
Standard Post Introductory Rate
Variable APR*
Monthly Payment (per $1,000 borrowed)
Up to 80% Loan to Value2.49% APRCurrently 5.25% APR
Prime minus .25%
$8.04
*APR = Annual Percentage Rate. While this page is updated regularly, rates are subject to change. Introductory APR is for 12 months. Monthly payment example above is per $1,000 borrowed, at the post introductory APR with no additional advances or rate increases. Minimum monthly payment equals $100. The standard, post-introductory APR will be a fully indexed, variable rate based on the Prime Rate. Prime Rate is obtained from the Wall Street Journal and is currently 5.50%, in effect since 9/28/18. The minimum standard APR that can apply is 4%, and the maximum APR that can apply is 14%. Your standard rate is variable and may adjust on a semi-annual basis. Subject to credit approval and verification of collateral. Adequate property and flood insurance are required, if applicable. Central will pay all initial closing costs except the home appraisal. If the line is paid off and closed within 24 months of original note date, closing costs must be reimbursed to Central by the borrower. Closing costs vary and generally range around $850 to $1,000 on a $20,000 line of credit.