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Covering Expenses with a Home Equity Line of Credit

COVID-19 has blown through our normal lives in 2020, disrupting economies, businesses and families without warning. Non-essential businesses have been shut down, temporarily or sometimes permanently, and many people have been thrust into difficult financial situations. Even as we reopen our economy carefully, many are still struggling with the impact of this pandemic and are in need of financial options.

We want to make sure that our members are aware of all of their resources for financial security during these uncertain times. If you own a home, the equity you’ve built up in your property is an important and accessible financial resource.

How to Use Home Equity

Applying for a home equity line of credit (HELOC) can enable homeowners to use their equity to meet financial challenges. HELOCs can have several benefits over other types of loans:

  • Interest rates tend to be lower than for unsecured credit.
  • They charge no or low closing costs.
  • Borrowers can use only as much of their available limit as they need, when they need it, and pay interest only on what they use.
  • Repayment options are flexible.

The funds from a HELOC can be used for virtually any purpose. For homeowners who have lost time at work due to the coronavirus pandemic, household bills don’t stop. They can use HELOC funds to pay utilities and car payments, credit card bills, taxes, even federal student loan payments, thereby avoiding hits to their credit rating that could affect their financial life for years to come.

Homeowners who owe a variety of creditors can use funds from a HELOC as a debt-consolidation loan, reducing the number of payments coming in monthly and potentially the interest costs as well.

If a family member contracts COVID-19 or any other health problem, funds from the line of credit may help pay for expenses not covered by insurance — deductibles, medicine, delivery costs for groceries and other essentials, home care and more.

Even homeowners who are currently stable may find it reassuring to have a HELOC as a financial safety net. Most of us have an unusual amount of stress in our personal lives right now, living in a world that feels far from normal. No one needs the added stress of worrying about money.

How Much HELOC Can I Get?

The size of HELOC a homeowner will qualify for depends on their equity value (the market value of the home minus their current mortgage balance), credit rating, and other criteria.

For example, let’s say a home is worth $500,000. How much its owner can borrow depends on a loan-to-value ratio (LTV) set by the lender. Average LTVs range from 70% to 85%. If the loan-to-value ratio is set at 70%, that puts the maximum financing that can be secured by this home at $350,000. Next, the mortgage balance is subtracted from that $350,000. So, if the homeowner currently owes $250,000 on the mortgage, $350,000 less $250,000 leaves $100,000 in home equity available to borrow against.

Our home equity line of credit calculator can help you estimate how much you may be able to borrow.

Apply for a Home Equity Line of Credit with Bethpage

If you own your home, you’re eligible to apply for a home equity line of credit. Certain criteria are used to determine qualification, including credit history, employment, income, the percentage of equity you have in your home and the amount you wish to borrow.

When you are ready to start the home equity lending process, you’ll need to collect information about you and any co-applicant:

  • 2 recent pay stubs and your employment history
  • Full tax returns, including all schedules and W2’s
  • 1st mortgage statement (if you are currently paying a first mortgage), plus information on property taxes and insurance

Applying for a HELOC is simple at Bethpage. You can start by applying online, in person at a branch or over the phone at 1-855-330-6630. Once you’ve submitted your application, we collect your financial information and run a credit report. Our next step is to appraise your property to confirm how much equity you have available.

Bethpage has excellent rates for HELOCs as well as trusted experts who can help guide you through this process.

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