Skip to Content loading...

Not a member yet?

Listerhill Credit Union is a nonprofit financial cooperative improving lives in our community.

If you live in Alabama, Georgia, Mississippi, Florida, or Tennessee, you are eligible to become a member. Depending on your individual eligibility, we may require membership into an approved association at no cost to you.

You can also qualify for membership by being a family member of a current or potential Listerhill member.

With only $5, you can join Listerhill today and start taking advantage of a lifetime membership.

Home at Night with Lights On

HELOC: Home Equity Line of Credit FAQs

Ready to tap into your home equity but wondering what is a home equity line of credit, what are the associated rates, and more?

Editorial Note: Articles published are intended to provide general information and educational content related to personal finance, banking, and credit union services. While we strive to ensure the accuracy and reliability of the information presented, it should not be considered as financial advice and may be revised as needed.

Thinking about tackling a home improvement project? Maybe you’re tired of making several different credit card payments and would like the convenience and savings of paying them off in one low-interest monthly payment.

For short-term goals and projects like this, you may want to consider a home equity line of credit (HELOC). If you’re a homeowner who has built up some equity on your home, you may be eligible.

What is a HELOC loan, exactly? We’ll answer some of your most commonly asked questions about this financing and debt consolidation option.

What is a HELOC?

A HELOC is a way of borrowing against the value of your home. Unlike a conventional home loan –where you receive your loan amount in a lump sum, then make monthly payments, usually, at a fixed interest rate– a HELOC works more like a credit card.

Lenders offer you a line of credit, usually up to around 85% of your home’s equity. You can take out the money as needed during a draw period (often of about 10 years), commonly making payments only on the interest, although sometimes with the option to pay off the principal, as well. Then, during a typical repayment period of around 20 years, you pay off the remaining balance on both the principal and interest.

How do they work, and how much can I borrow?

So what exactly does it mean to “borrow against the equity of your home”? It’s one of those phrases that are out there in the ether, but it’s not always clear how that works.

First, you’ll want to figure out how much equity you have in your home. All that really means is how much of your mortgage you have paid, relative to the market value of your home. Your equity is the difference between the two.

Once you know that, you can calculate your loan-to-value ratio to determine the percentage of equity you have in your home using the following equation:

Current Mortgage ÷ Home’s Appraised Value = LTV

The result, your LTV, is the percentage of equity you have in your home. Borrowers who qualify for HELOCs usually have 15% to 20% equity in their homes.

Lenders then calculate your Combined Loan to Value Ratio (CLTV) to determine your HELOC credit limit, usually capping your HELOC amount at around 80% to 85% of your home’s value.

To determine your HELOC amount, lenders take your remaining mortgage balance and subtract it from 85% of the overall value of your home. The difference is your credit limit.

A HELOC is a secured loan, using your home as collateral, which usually helps you get a lower interest rate.

Figure out what you might be able to borrow using our loan calculators.

How do you get a HELOC?

As previously mentioned, if you have between 15% and 20% equity in your home, you have already completed the first step in getting a HELOC.

The next important factor is your credit score. Ideally, at a minimum, it should be in the mid-600s. Now, the benefit of financing with a credit union, is they will often work with you to find a personalized solution, even if your credit score is lower than the mid-600s.

Once you know how much equity you have and your credit score, you are ready to compare lender rates. Here are some factors to consider when choosing a HELOC lender:

  • Home equity line of credit rates

  • Terms and conditions

  • Application fees

  • Closing costs

  • Convenience of accessing your HELOC and making payments

Once you’ve picked a lender, you’re ready to go ahead and apply. Your lender will likely require you to provide documentation about your mortgage and any existing debt, as well as proof of income and employment.

What can you spend the credit on?

If you’re approved for a HELOC, what you spend it on is up to you.

Keep in mind, however, that you need to pay off whatever you take out during your repayment period. Additionally, there are certain ways to spend your credit that are more advantageous to you.

What is the interest rate on a HELOC? Is it tax-deductible?

While fixed-rate HELOCs are a thing, more typically they are offered at variable rates. You may be able to find initial fixed interest, but check to see how long that lasts and what the rates are after that initial period.

The good news is, interest on HELOCs can be tax-deductible if you use it to substantially improve your home and its equity. Examples can include kitchen remodeling, resurfacing your driveway, replacing your HVAC, or adding an extension to your home.

Is it better to get a home equity loan or a HELOC?

Whether a home equity loan or a HELOC is a better fit for your particular situation will depend on a variety of factors, such as the amount of equity you have in your home, how far along you are on your mortgage payments, your credit score, your existing debt, and more.

With a home equity loan, the fixed-rate monthly payments on a lump sum might be preferable. If you think you’ll need different amounts of money at different times, a HELOC is often a good match. However, if you are confident that you will need a specific amount of money at a specific time, a home equity loan might be a better option.

Other lending alternatives that your lender might suggest include personal loans, 0% intro APR credit cards, or a CD or family loan.

Along with the personalized customer service that comes with credit union membership, Listerhill offers HELOCs with low interest rates, no annual fees, and convenient access and repayment options.

Learn more about our HELOCs today.

default icon for Solution Finder Intro
What can we help you with? *
default icon for Checking For Mature Members
What are you borrowing for?
default icon for Checking For Mature Members
Vehicle Options
default icon for Checking For Mature Members
Home Options
default icon for Carrolls
What are you saving for?
default icon for Carrolls
How old are your kids?
default icon for Cord
Which of these banking options are you interested in?
default icon for Cord
How old are you (or your child)?
default icon for Cord
How old are you?
default icon for Cord
What kind of account are you looking for?
search popup background

What are you looking for?

Common Links

Frequently Asked Questions

  • What happens when federally insured credit unions merge?

    If a member has accounts in credit union A and credit union B, and credit union A merges into credit union B, accounts of credit union A continue to be insured separately from the share deposits of credit union B for six months after the date of the merger or, in the case of a share certificate, the earliest maturity date after the six-month period. In the case of a share certificate that matures within the six-month grace period that is renewed at the same dollar amount, either with or without accrued dividends having been added to the principal amount, and for the same term as the original share certificate, the separate insurance applies to the renewed share certificate until the first maturity date after the six-month period. A share certificate that matures within the six-month grace period that is renewed on any other basis, or that is not renewed, is separately insured only until the end of the six-month grace period.

  • What happens if a federally insured credit union is liquidated?

    The NCUA would either transfer the insured member's account to another federally insured credit union or give the federally insured member a check equal to their insured account balance. This includes the principal and posted dividends through the date of the credit union's liquidation, up to the insurance limit.

  • If a credit union is liquidated, what is the timeframe for payout of the funds that are insured if the credit union cannot be acquired by another credit union?

    Federal law requires the NCUA to make payments of insured accounts "as soon as possible" upon the failure of a federally insured credit union. While every credit union failure is unique, there are standard policies and procedures that the NCUA follows in making share insurance payments. Historically, insured funds are available to members within just a few days after the closure of an insured credit union.

  • What happens to members with uninsured shares?

    Members who have uninsured shares may recover a portion of their uninsured shares, but there is no guarantee that they will recover any more than the insured amount. The amount of uninsured shares they may receive, if any, is based on the recovery of the failed credit union's assets. Depending on the quality and value of these assets, it may take several years to conclude recovery on all the assets. As recoveries are made, uninsured account holders may receive periodic payments on their uninsured shares claim.

  • What happens to my direct deposits if a federally insured credit union is liquidated?

    If a liquidated credit union is acquired by another federally insured credit union, all direct deposits, including Social Security checks or paychecks delivered electronically, will be automatically deposited into your account at the assuming credit union. If the NCUA cannot find an acquirer for the liquidated credit union, the NCUA will advise members to make new arrangements.