If you need some extra funds to buy an investment property or remodel your existing house, and you are trying to decide between taking out a mortgage or a Home Equity Line of Credit, Susie Plowhead, real estate loan officer at Central Willamette Community Credit Union, can help give you the information to help you decide which is best for you.
Plowhead explains a Home Equity Line of Credit — also called a home equity line — is revolving loan, kind of like a visa without the card. You pay back only what you use and then it becomes available again during the draw period. A mortgage is a one-time chunk of money that you pay back over a set period of time, often times over a longer period.
Some pros to getting a Home Equity Line of Credit are:
- Only pay interest on what you use, not the limit.
- What you use is what you pay. “If you have a limit of $50,000, but you only used $25,000 of it, you only have to pay back the $25,000,” Plowhead explained.
- You can get a home equity loan in as little as two to three weeks depending on appraisal times.
- The closing costs are generally lower.
“I would recommend a Home Equity Line of Credit to someone who is looking to do home improvements, consolidate debts or put aside some money for emergency use,” Plowhead said. “Of course, someone must own their home to get a Home Equity Line of Credit.”
Some pros to getting a mortgage are:
- You can select a fixed rate.
- You can choose your term (10, 15, 20 or 30 years).
- It has a fixed payment with both principle and interest. “This makes it easier to budget every month,” Plowhead said.
- Could be a lower payment.
“I would recommend a mortgage to someone who wants to purchase a new home, acquire a second home, or an investment property with potentially lower payments and longer terms,” Plowhead said. “This would also be good for a cash-out refinance to consolidate debt, make a larger purchase or even just refinance for a better rate and/or term.”
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Plowhead explains that in either case — a Home Equity Line of Credit or a mortgage — the interest could be a tax deduction.
At Central Willamette Community Credit Union, someone could take out a mortgage with a credit score as low as 620 depending on the program they are working with.
“Someone with a lower credit score may not qualify for as good of an interest rate as someone who has a higher credit score,” Plowhead said. “And some programs we have require a person have a higher credit score, but 620 is the minimum score needed for other programs.”
With a Home Equity Line of Credit, Central Willamette Community Credit Union looks at more than just a person’s credit score.
“We look at their debt-to-income ratio, the purpose for the loan, payment history on other debt, and time on their job,” Plowhead said. “We might give someone with a much lower credit score a Home Equity Line of Credit. It just depends on their circumstances and the whole picture rather than just one piece.”
Central Willamette Credit Union is ready to help anyone find the solution to their mortgage or Home Equity Line of Credit needs.
For more information on what would work for you, stop by any Central Willamette Community Credit Union location in Albany, Corvallis, Lebanon or Salem, or call 800-950-4536 to speak to someone in our Real Estate Department.