Loans

Home Equity Loan & Line
Frequently Asked Questions (FAQ's)

 

Line-of-Credit | Equity Loan | Apply Now

Is there more than one type of home equity program?

Yes, there are two types.

Our first program is line of credit plan that requires monthly payments of principal and interest throughout the term of the draw period and repayment period. You can choose to take advances on the line for 5 years and after the draw period is over, you can repay the balance over 15 years, OR you can choose to take advances on the line for 10 years and after the draw period is over, you can repay the balance over 20 years. This program offers great flexibility when making your monthly payments.

Our second program is a fixed payment, rate, and term program where the entire loan amount is disbursed upfront and a fixed payment amount is made on a monthly basis until the loan is paid in full. We offer 5, 7, 10 & 15 year fully amortized loans and a 7 year fixed rate loan with up to a 30 year amortization and a balloon payment due at the end of 7 years.

What is the home equity line-of-credit plan?

The home equity plan is a line-of-credit secured by the equity in your home. A line-of-credit is established, then you are able to draw from your account whenever you need money for a major purchase, education, or home improvement. You don't have to complete a lengthy application each time you make an advance.

What if I need the money for a bridge loan?

If this loan is for a bridge loan, meaning this will be a second mortgage on your existing home and the funds will be used to purchase a new home, the maximum loan to value is limited to 80% for the first and second mortgages combined. If the first mortgage loan for the new home is not financed by the Abri, a $350 application fee will apply. At the time of payoff, an early closure fee up to $350 will be added to the payoff letter for all home equity loans to cover the fees incurred by the Abri.

If a new first mortgage is obtained through Abri, you will be required to pay only the actual fees associated with obtaining the bridge loan, and the application fee and early closure fee will be waived.

Any promotional rates offered by Abri will not be applicable for a bridge loan.

How may I access my line-of-credit once is it established?

Approximately two weeks after signing your loan agreement, you will receive a book of checks that can be written for your purchases, etc. These checks will clear against your line of credit and interest will begin to accrue at that time. You can also call the credit union and ask us to send a check to you, you can access it through online banking, or we can advance funds and deposit them directly into your account at the credit union.

What may the borrowed funds be used for?

A home equity loan/line-of-credit plan can be used to consolidate existing high cost debt, finance a car, make home improvements, or pay for college or other educational expenses. Other uses include wedding expenses, computers, recreational vehicles, etc.

How is the home equity loan/line secured?

The loan/line is secured by a first or second mortgage on your home equal to the amount approved. The home must be a residence owned by you and located in the states of Illinois or Idaho. We are unable to grant a mortgage/lien on vacant property or mobile homes. If you sell your home, the entire balance of your loan must be repaid in order to clear our lien from the title to your home.

What is the application procedure?

After you complete and submit your loan application, a representative will contact you to review your request. At that time, the loan requirements and cost will be explained. Also, we will let you know what information is needed. In addition to your credit application, we will need verification of your income, a copy of your homeowner's insurance policy, a copy of your tax bill, a statement from your first mortgage holder, as well as authorization to check credit and order an appraisal/title search.

How long will it take to get a home equity loan/line?

Credit approval is usually granted within 24-hours of receipt of a complete application package. We anticipate that the entire process will take 2 to 3 weeks. The appraisal, credit report, and title search are ordered immediately after your application is approved and you authorize us to proceed. When these are returned, we will contact you to schedule a closing.

Is the interest tax deductible?

As a general rule, the interest you pay on a home equity loan/line is deductible on your personal tax returns, however, the IRS rules place limitations on the amount of interest you can deduct depending on the size and purpose of the loan. We recommend that you consult your tax advisor for details.

How is the amount of the equity loan/line determined?

The amount is determined by the net value of the applicant's home and the ability to repay. In addition, you must meet Abri's standards of credit worthiness. Each request is unique and will be judged on its own merits.

How is the net value of the home determined?

The value of the home is determined by a professional appraisal of market value.

Home Equity Line of Credit

The net value is equal to 80%* of the appraised value less any mortgages or related liens or liabilities. Here is an example of how to calculate the net value (available equity) in your home:

Appraised value of home: $125,000
  x     80%
  $100,000
Less First Mortgage Balance: $  65,000
Net value/available equity $  35,000

*Loan or line amounts can exceed 80% for well qualified borrowers, but there is a higher rate for amounts between 81% - 90% Loan to Value

Home Equity Fixed Rate Loan

The net value is equal to 85%* of the appraised value less any mortgages or related liens or liabilities. Here is an example of how to calculate the net value (available equity) in your home:

 

Appraised value of home: $125,000
  x     85%
  $106,250
Less First Mortgage Balance: $  65,000
Net value/available equity $  41,250

*Loan or line amounts can exceed 85% for well qualified borrowers, but there is a higher rate for amounts between 86% - 90% Loan to Value

What are the minimum and maximum amounts I can borrow?

The maximum line-of-credit is $200,000 and the minimum line is $10,000.

The maximum fixed loan is $200,000 and the minimum loan is $5,000.

What about my first mortgage?

Your current first mortgage, if you have one, will not be affected. Our lien must be the only remaining recorded lien on your home except for your first mortgage. Any other mortgages or liens must be paid-off by our loan.

How is the interest rate determined on the loan program vs. the line-of-credit?

The interest rate for fixed rate loans are set in accordance with current market rates, and is fixed for the entire life of the loan.

For lines-of-credit, the interest rate (APR) for all advances and for any existing balances is indexed to the prime rate listed in the Money Rates column of the Wall Street Journal on the last business day of each calendar month. The plans offered by Abri Credit Union have tiered interest rates that are based on the credit line and determined as follows:

Rates effective as of 3/01/2017
20 Year Line of Credit (5 year draw - 15 year repayment)

Line-of-Credit Rates Index/Margin
$10,000 - $24,999.99 5.25% APR Prime + 1.5%
$25,000 - $49,999.99 4.75% APR Prime + 1%
$50,000 - $99,999.99 4.25% APR Prime + .50%
$100,000 and above 3.90% APR Prime


30 Year Line of Credit (10 year draw - 20 year repayment)

Line-of-Credit Rates Index/Margin
$10,000 - $24,999.99 5.75% APR Prime + 2.0%
$25,000 - $49,999.99 5.25% APR Prime + 1.5%
$50,000 - $99,999.99 4.75% APR Prime + 1.0%
$100,000 and above 4.25% APR Prime + .50%

 

The line-of-credit has a variable rate that is subject to change each month. The rate can increase or decrease over time, and will never be more than 18% APR or less than 3.9% APR.

The following applies to both the fixed rate and line of credit loans:

  • If the Loan-to-Value is greater than 80%, 1% must be added to the rates shown above.
  • Any promotional rates offered by the credit union will not be applicable for loans with a Loan-to-Value that is greater than 80%.

What about payments?

Regular monthly payments are required under both plans. They are explained in detail below.

Fixed Rate Plan - Fixed payments of principal and interest are made monthly until the loan is paid in full. Fixed payments are also required on the 7 year fixed loan with up to a 30 year amortization, and a balloon payment due at the end of 7 years. There will be an early closure fee up to $350 if the loan is paid off and closed within the first 36 months.

Home Equity Line of Credit - Monthly payments of principal and interest are required. The monthly payment amount will be calculated at the end of each month, based on the outstanding principal balance and the amortization schedule of the loan. There will be an early closure fee up to $350 if the line is paid off and closed within the first 36 months.

With all Abri Credit Union loans, larger payments can be made at any time without penalty (with the exception of closing the Home Equity Line or Home Equity loan within the first 36 months). Payroll deduction or allotment payments can usually be arranged.

What fees are applicable?

All fees for your home equity application are paid by Abri, with the exception of bridge loans. Fees will be paid by the credit union for the first home equity loan/line established. Borrowers are required to pay all fees associated with refinancing an existing Abri home equity loan/line of credit, with a minimum fee of $125. There are no points charged and there is a $50.00 annual maintenance fee on a line of credit that is waived for the first year.

For all loans and lines-of-credit, there will be an early closure fee up to $350 if the loan / line is paid off and closed within the first 36 months.

How are future advances on lines of credit handled?

Once your Home Equity line-of-credit is established, future advances are quick and easy. You will be issued a book of checks that you can write anywhere they are accepted. We can also send you a check or deposit the advance into your Abri Credit Union account. An advance can also be made through Online Banking. There is no charge to make an advance. There is no minimum initial advance and future advances can be made for as little as $500. Advances may be made at any time during the contract period. This draw period may be refinanced at your option.

What about my tax and insurance escrow?

If you have a first mortgage, your first mortgagee will usually maintain a fund to pay real estate taxes and homeowner's insurance. Copies of your paid tax receipts and current insurance policy will be needed for our files. Our agreement requires that homeowner's insurance is maintained and taxes are current at all times.

Will I need to change my homeowner's insurance coverage?

Yes. Ask your agent to add Abri Credit Union as the 2nd mortgagee and mail a copy of the policy to Abri Credit Union: Attn: Real Estate Dept.

Home Equity loans are not assumable by any buyer of your home and must be repaid at the time of sale.