When it comes to Home Equity Lines of Credit (HELOCs), Somerville Credit Union stands out as a top-notch financial institution. We take pride in offering one of the finest HELOC options available in the market. Our commitment to excellence extends to serving our Somerville community with our exceptional Home Equity Line of Credit.

Advantages of Choosing a HELOC

A HELOC (home equity line of credit) provides a convenient way to tap into the equity of your home without the need for refinancing. With a HELOC, you have the flexibility to access funds whenever you need them and use them for various purposes:

Ideal for:

  • Home improvements
  • Consolidating debt
  • Paying off student loans
  • Managing planned or unexpected expenses

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What to Know About HELOC Draw and Repayment Periods?

Home Equity Lines of Credit (HELOCs) is popular financial tool for homeowners looking to leverage their property’s equity. HELOCs provide flexibility in accessing funds and come with two distinct periods: the draw period and the repayment period. Understanding these periods is crucial for borrowers to make informed decisions and manage their finances effectively.

What is a HELOC?

A HELOC is a type of revolving credit that allows homeowners to borrow against the equity in their homes. It functions similarly to a credit card, where borrowers have a credit limit and can withdraw funds as needed during a specified draw period. HELOCs are often used for home improvements, debt consolidation, education expenses, or other major expenses.

Draw Period

The draw period is the initial phase of a HELOC during which borrowers can access funds and make withdrawals. This period typically lasts between five to ten years (could be longer), depending on the terms of the loan. During the draw period, borrowers have the flexibility to withdraw funds up to their credit limit and only pay interest on the amount they use.

At Somerville Credit Union, maximum HELOC is $250,000, combined LTV (loan to value) up to 80%. Terms up to 15 years. 100% LTV HELOC program is available Call (617) 625-0898 for details.

Key Points about the Draw Period:

  • Access to Funds – Borrowers can withdraw funds as needed during the draw period, making it a flexible financial tool.
  • Interest-Only Payments – Typically, borrowers are required to make interest-only payments during the draw period, although some lenders may allow for principal payments as well.
  • Credit Limit – The credit limit is set at the beginning of the draw period based on factors such as the home’s value, mortgage balance, and creditworthiness of the borrower.
  • Variable Interest Rates – HELOCs often come with variable interest rates, meaning the rate can fluctuate based on market conditions.

Repayment Period

After the draw period ends, the HELOC enters the repayment period. During this phase, borrowers can no longer withdraw funds, and they must begin repaying both the principal amount borrowed and the accrued interest.

Key Points about the Repayment Period:

  • Principal and Interest Payments – Borrowers are required to make monthly payments that include both principal and interest during the repayment period.
  • Fixed or Adjustable Rates – Some HELOCs may offer the option to convert to a fixed interest rate for the repayment period, providing more predictability in monthly payments.
  • Loan Maturity – The HELOC reaches its maturity at the end of the repayment period, and borrowers must repay the entire outstanding balance by this time.

Considerations for Members

Before obtaining a HELOC, members should consider the following factors:

  • Financial Goals – Determine how the funds will be used and whether a HELOC aligns with your financial objectives.
  • Interest Rates – Understand the interest rate structure, including whether it’s fixed or variable, and how it may impact monthly payments.
  • Repayment Capacity – Evaluate your ability to make monthly payments, especially considering potential changes in income or expenses.
  • Fees and Charges – Be aware of any fees associated with the HELOC, such as origination fees, annual fees, or early termination fees.

HELOCs can be valuable financial tools for homeowners, offering flexibility and accessibility to funds based on home equity. Our Somerville Credit Union lending staff has many years of experience and is happy to assist you with process of obtaining HELOC.