Home Equity Line of Credit
Our Home Equity Line-of-Credit is a variable-rate loan with a maximum final pay-back term of fifteen years. Unlike the home equity loan, a credit limit is established that the borrower can then “draw” on for the first five years of the loan. The borrower only borrows as they need funds and their monthly payment is calculated on the amount actually borrowed.
WRCU also offers Home Equity Loans. Here is the difference explained
We will guide you through the process of applying for a home equity loan, contact us and ask to speak with a loan officer.
Home Equity Line of Credit Definitions
Property Specifics - Loans are available on single-family properties and Condominiums. Mobile Homes will be considered as collateral for a home equity loan if they meet the guidelines of the WRCU Mobile Home policy. All properties will be the primary residence of and occupied by the owner/member.
Minimum and Maximum Loan Amount –The minimum loan amount of any Home Equity Line of Credit (HELOC) will be $5,000. The maximum loan amount of any HELOC will be $125,000.
Maximum Term – there is a five-year draw period with a maximum loan term is 15 years after the end of the draw period.
Loan-to-Value (LTV) – The maximum home equity loan amount cannot be more than 90% for conventional properties, or 80% for mobile homes, of the property value as outlined in the Property Appraisals section of this policy, less any outstanding first mortgage. The LTV calculation excludes any existing mortgages, including home equities that will be paid off with the disbursal of the new home equity.
Debt Ratios – The debt ratio of an applicant normally will not exceed 43% with the inclusion of the new WRCU HELOC. Debt ratios exceeding 43% must be approved by the CMT or BOD. In considering a higher debt ratio, the following factors will be taken into account:
- Job stability
- Discretionary income
- Credit history in general
- Credit history with WRCU
Interest Rate Change Date – The interest rate may change quarterly on the first day of each calendar quarter. This new rate will be applied to all new HELOC’s, existing HELOC balances, and future HELOC advances.
Interest Index – The "Prime" rate as published in the Wall Street Journal under the "Money Rate" section rounded up to the next highest 1/4th of one percentage point. The current "Index" rate is determined by using the "Index" rate published on or most recently prior to, ten days before the change date. If more than one rate is published, the index will be the higher published rate.
Interest Margin – The amount added to the “Interest Index” (Prime rate) to determine the loan interest rate is .50 percentage points (50/100th).
Interest Rate Determinations – The interest rate will be determined by calculating the “Interest Index” and adding the “Interest Margin” as prescribed above. The resulting rate will be the interest rate applied to all new HELOC’s, existing HELOC balances, and future HELOC advances.
Maximum Interest Rate – The interest rate charged under these plans will never be greater than 18%.
Minimum Interest Rate – The interest rate charged under these plans will never be lower than 4%.
Minimum Initial Advance – The first advance on a WRCU Home Equity LOC will not be less than $2,000.00 (two thousand dollars).
Minimum Other Advance – Any advance made subsequent to the initial advance will not be less than $500.00 (five hundred dollars).
Balance Rounded – The loan balance will be rounded to the next highest $100.00 (one hundred dollars) for calculation purposes.
Payment Rounded – The loan payment will be rounded to the next highest $10.00 (ten dollars) amount. The loan payment will never be less than the smaller of $100.00 (One hundred dollars) or the full amount that you owe.
Loan Documentation – The credit union has developed procedures for home equity line-of-credit underwriting, closing and disbursal (Home Equity Phases). The credit union also has developed a check-off list to aid the loan officer with this procedure, as well as, in the preparation of the correct closing documents.
Loan Rates and Terms
Refer to the current WRCU Real Estate Rate Sheet. (Exhibit A shows a sample of this sheet.)
Draw Period (Last Advance Date) – Advances will normally not be made after the 5th anniversary of the loan closing. If a Borrower requests an additional draw period, the HELOC will need to be rewritten.
Payoff Period after Each Advance – At the time of each advance, a payoff period will be established for that credit advance. The length of the payoff period depends on the balances after each advance, as shown below:
|$1 – 8,000||60 monthly payments (5 yr.)|
|$8,001 – 15,000||120 monthly payments (10 yr.)|
|$15,001 – Above||180 monthly payments (15 yr.)|
However, the payoff period will always be the shorter of the time shown above or the time remaining to the maturity date of the mortgage. After an advance, the payment will be set to repay the balance within the payoff period. A change in the payment will take effect the month following the calculated payment change. This payment will remain the same unless:
- Another credit advance is taken. After an advance, the payment will be set to repay the balance within the payoff period.
- The annual percentage rate has increased enough that the current payment is no longer sufficient to repay the balance within the payoff period. If this is true, the payment will be recalculated and set to repay the balance within the original payoff period. At a minimum, this will be verified every twelve months.
Mortgage Deed – The Mortgage Deed shall contain a due-on-sale provision.
Payments – Payments shall always be due on the 25th day of the month. Each member will be encouraged to have their home equity payments direct deposited into their share or share draft account with an automatic deduction from that account each month for credit to the home equity debt.
Late Fees – A late fee will be assessed when the full amount of any monthly payment is not received by the end of fifteen (15) calendar days from the date it is due. The late fee will be 5.00% of the regular monthly payment.
Title Search & Opinion – A title opinion for Home Equity mortgages will be prepared covering a forty-year period. A current owners’ search can be prepared for property that the Credit Union already has a full 40-year title opinion on file for. Title insurance will be required on all loans of $50,000.01 or more.
Credit Report – A merged credit report will be obtained for all borrowers utilizing Experian, Equifax and TransUnion credit bureau data.
- Homeowners Insurance – A Homeowners insurance policy must be in force naming the WRCU as the loss payee. The policy must be for at least the amount of the loan balance. Exceptions will be reviewed and approved by the CMT or BOD. Force placing insurance will be considered to cover insurance deficiencies.
- Flood – All property will have a flood zone determination. Flood insurance must be obtained if property is determined to be in a flood zone. The policy must be for at least the amount of the loan balance. Exceptions will be reviewed and approved by the CMT or BOD.
- Force Placed Insurance – In the event that a borrower fails to maintain either homeowners or flood insurance, then WRCU will force place the insurance with the carrier of its choice in the amount of the outstanding principal. The borrower will be responsible for the cost of this forced placed insurance. This insurance only protects the credit union’s interest.
- The credit union designates staff to follow-up on expired or cancelled property insurance in a timely manner.
Property Appraisals – The town appraised value, otherwise known as the municipal assessment, or a third party property appraisal may be used if it is less than 2 years old.
A current photo of the property must be provided.
A new third party property appraisal may be required otherwise. A credit union approved and qualified Appraiser, as defined by the NCUA and who has the correct certifications and licensing, must perform this appraisal.
A property appraisal may be waived at the discretion of the CMT or BOD. Any waiver of a property appraisal must be documented in the loan file. In considering a waiver of appraisal, the following factors will be taken into account:
- Loan to Value is 60% or less for conventional properties or 50% of that value for mobile homes
Access – Funds can be advanced to the member after they have contacted the WRCU to request an advance by mail, email, and phone or by coming into one of the offices.
Quality Control – All HELOCs will have a quality control review performed on the file after the closing. This quality control review will verify the contents of the file for the proper closing documents, correct dates and signatures and all other pertinent information as outlined in the WRCU Home Equity Loan Quality Control form. As part of the quality control function, loan officer adherence to policy and procedures and the perfection of liens is verified.