|
What is a Home Equity Loan?
A home equity loan is a form of credit in which your home serves
as collateral. A home equity loan is advanced in one lump sum. You
make fixed monthly payments over a fixed term. A loan makes it
easier to budget, since your monthly payments remain the same over
the life of the loan.
What is a Home Equity Line of Credit?
A home equity line of credit is a form of revolving credit in
which your home serves as collateral. A home equity line of credit
is a set amount of money you are approved to use whenever you like.
It gives you the flexibility to borrow funds when you need them.
Access your funds by writing checks. As you repay the balance, you
can reuse it up to your approved credit limit. You are charged
interest only on the funds you use. NEA home equity lines of credit
feature a variable interest rate with a draw period of ten years
and a repayment period of 20 years. When the draw period expires,
and if the draw period is not renewed, you would begin to repay
your outstanding balance in full, over the term of the repayment
period.
How much can I borrow?
Your loan amount or credit line limit (the total amount you are
able to borrow) is determined by taking a percentage (for example
80%, 90% or 100%) of your home's appraised or fair market value,
and subtracting the balances of any outstanding mortgages on the
property. If you qualify for NEA home equity financing, the minimum
home equity loan or line of credit amount is $5,000. The maximum
loan amount is $500,000 for a primary residence, $250,000 for a
second or vacation home, and $100,000 for a non-owner occupied
residence.
What are the terms?
NEA home equity loans offer terms between five and 30 years. NEA
home equity lines of credit can be drawn on for 10 years. After 10
years, you can apply to renew your line of credit. If you do not
renew, you will no longer be able to draw additional funds from
your credit line; your account balance will be amortized over 20
years and payable in 240 monthly installments, per the terms and
conditions of your account agreement.
Is the interest tax deductible?
With a home equity loan or line of credit, you may be able to
deduct the interest payments from your taxes. In many cases, the
interest on a home equity loan or line of credit may be fully tax
deductible if:
· The total amount of home equity debt on your main home
and second home does not exceed $100,000
· The loan-to-value ratio does not exceed 100%
· You itemize your deductions on your tax return
Consult you tax advisor about your specific situation, because
there can be exceptions. For more information on the tax
deductibility of interest paid on home equity loans and lines of
credit, read IRS Publication #936 "Home Mortgage Interest
Deduction."
Must I occupy the residence I'm using as
collateral?
Under the NEA Home Financing Program, you do not have to occupy
the residence you are using as collateral unless you are requesting
a home equity loan or line of credit where the loan to value ratio
is greater than 80%. The loan to value ratio is the amount of all
mortgages or liens against your home in comparison to your home's
value, expressed as a percentage.
What are the minimum payment terms?
For NEA home equity loans, your monthly payment amount will be
determined by the amount you borrow, your interest rate and the
term of the loan. Your payment amount will stay fixed for the life
of the loan. For home equity lines of credit, your minimum payment
during the 10 year draw period is equal to one month's accrued
interest, plus any unpaid fees (a late fee, for example) or other
charges. Or, you can elect to pay 1.5% of your outstanding equity
line balance each month
When will I be billed and how often?
Your home equity loan payment will be due monthly. For home equity
lines of credit, you will receive a monthly statement whenever you
carry a balance or if transactions have posted to your account.
What is the minimum draw amount on my Home
Equity Line of Credit?
The minimum draw amount on NEA home equity lines of credit is
$300.
|
