Equity Line of Credit Offers A Convenient Feature
Oahu’s upsurge in property values provides an excellent opportunity for homeowners wanting to take advantage of the increase in their home’s equity. Traditionally, a home equity line of credit (HELOC) allows a borrower to tap into the equity in their home to finance major purchases or pay other expenses. And because the line uses the home as collateral, interest rates are often much lower than with personal loans or other forms of credit.
Generally, the amount you can qualify for is 80 percent of the home’s current value less your mortgage balance. A HELOC then gives you access to funds as you need them, and you pay interest only on the money you actually draw. Typically, a HELOC will have a low fixed interest rate during an introductory period but will change to a higher variable rate after that period ends.
With an uncertain interest rate environment, First Hawaiian Bank has been promoting a convenient feature to the traditional HELOC that is gaining in popularity: an equity line of credit with a fixed-rate lock feature.
“Customers want to have the flexibility of a line of credit, which they can draw on as needed, but they also want to have the ability to lock in balances with competitive rates, like a loan,” says Derek Wong, vice president of Retail Credit Products at First Hawaiian Bank. “This is great for homeowners with sufficient equity in their homes and who want convenient access to funds for a wide range of needs, such as to buy a car, refurnish the house, pay for tuition or consolidate bills.”
HELOC borrowers can lock all or a portion of the outstanding balance on the variable portion of the line along with any new draws. And while the fixed-rate lock portion is part of the line of credit, the locked portion may have a separate amortization schedule than the regular variable line of credit. It’s like two products rolled into one.
“We make it easy for our HELOC customers to request a fixed-rate lock since it’s already a part of their line. There’s no need to reapply like you would for a separate loan,” Wong states. “Plus, borrowers may have up to five locks at one time.”
Wong highlighted the benefits of a HELOC with a fixed-rate feature:
1. For those who intend to carry a large balance on their line of credit for a longer period of time, locking in a fixed rate on that balance helps protect against variable or rising interest rates the balance would otherwise be subject to.
2. A fixed-rate lock also provides fixed, predictable monthly payments, which may be more convenient and easier to manage.
3. Additionally, as you pay down the fixed-rate lock portion, the credit limit on the line is replen
ished — unlike a typical loan that you wouldn’t have the option of borrowing from again.
“Here’s an example,” says Wong. “You may want to use the fixed-rate lock to pay for your child’s college or private school tuition (to make it easier to spread out the payments on this large sum over time), but use the remaining line of credit for other expenses, such as a new home appliance.
“Another example might be to use the fixed-rate lock to purchase a new car and then use the remaining line to help consolidate bills, credit cards or other higher-interest loans.”
First Hawaiian Bank has a great promotion on its HELOC and fixed-rate locks going on now through the end of August. If you need money to spruce up your home, or perhaps you’re facing unexpected medical bills — or you plan to help your keiki with college tuition and expenses — a home equity line of credit with a fixed-rate lock may be just the solution. It’s worth talking with a personal banker at First Hawaiian Bank to see if this option is a good fit for you.
Apply online at FHB.com or at any branch. A personal banker is waiting to assist you with all of your home equity financing needs.