Summary
- Whether you’re planning a home renovation, consolidating debt, or covering education expenses, a Home Equity Line of Credit (HELOC) can be a powerful financial tool. (Not quite sure what a HELOC is? Read our Explainer Guide to learn more!).
- Once you decide you’re interested in a HELOC, what happens next?
- Let’s explore the typical process – from application to repayment – so you can move forward with the key information to know.
Choosing a Lender
The first step is choosing a lender – and different lenders may have different rates, so it’s important to do your research to find the combination of features and interest rates that best fit your needs.
Generally, lenders will have a team of loan officers with Nationwide Mortgaging Licensing System (NMLS) credentials – this means they can discuss mortgage products, such as a HELOC. At Eastern Bank, our experienced team is NMLS certified and can explain pricing and rate options, as well as guide you through the application process. If you are considering a HELOC, it can be helpful to ask your lender, “What is your interest rate?” and “Do you have any promotional offers?”
Application & Approval
Once you’ve chosen a lender, it’s time to apply. Depending on the lender, this may be done online, over the phone, or in-person at a branch. The application will typically require personal and financial information to evaluate eligibility, such as:
- Proof of income
- The address and estimated value of the property you plan to use as collateral, and
- Personal identifying information (PII) like your date of birth
Requirements may differ, so check with your lender to ensure you are prepared. After your application is submitted, many lenders aim to provide a decision within a few business days to a week, though timelines can vary. Be very intentional about the terms of your application and agreement since they can be difficult or not possible to change after closing.
Once your application is approved, you’ll move into closing – which is the formal process of signing the necessary documents and officially opening your HELOC account. Typically, you can expect to close within 30 days of applying for an agreed upon HELOC. After closing, you may exercise the industry standard three business days right to rescind, if applicable. After this time period, your line of credit becomes active, and you can begin accessing funds up to your approved limit.
Accessing Funds
HELOC funds can be accessed several ways.
- Many lenders issue a check, but funds can also be made available through online banking transfers or visiting a branch.
- During the draw period (usually between 10- to 15-years), you can borrow as much as needed and make interest-only payments on the amount used.
- As you repay the balance, the funds become available again – kind of like a credit card, but with a lower interest rate.
Repayment
Once the draw period ends, the repayment period begins.
- This is typically 15- to 20-years, during which both the principal and interest are repaid. At this point, you can no longer draw additional funds from the line.
- Monthly payments may also increase, so it’s important to plan for the transition.
- In some instances, borrowers may opt to pay off their HELOC entirely, though it’s important to check whether early closure fees or other costs apply.
Some lenders, like Eastern Bank, offer the ability to convert a portion of a HELOC to a fixed rate during the draw period.
- This can be helpful if you have a specific project or expense in mind and prefer predictable monthly payments.
- The remaining balance can stay on a variable rate, giving you flexibility for future needs.
If you still have equity in your home and need continued access to funds, you may have options.
- This can include refinancing your existing HELOC or applying for a new one, effectively starting a new draw period. Talk to your lender about what is best for you.
Understanding each phase of the HELOC process will help you make informed decisions and get the most out of your home’s equity.
If a HELOC sounds like the right solution for you, you can complete our easy online application today.
The opinions expressed herein are those of the authors and do not necessarily reflect those of Eastern Bankshares, Inc., Eastern Bank, or any affiliated entities. Views and opinions expressed are current as of the date appearing on this material; all views and opinions herein are subject to change without notice. These views and opinions should not be construed as any specific recommendation. This material is for your private information and we are not soliciting any action based on it. The information in this content has been obtained from sources believed to be reliable but its accuracy is not guaranteed. There is neither representation nor warranty as to the accuracy of, nor liability for any decisions made based on such information.
