The Guide You Want for Home Equity Loans and Lines of Credit

No matter how carefully we plan our budgets, life is bound to happen and disrupt our projected cash-flow plans. Whether it’s an unforeseen medical expense, a sudden layoff from a job, or a major appliance breakdown, we all face times in our life when having access to extra cash is beneficial. And if you’re a homeowner, you may be able to use the equity in your home to secure a loan or line of credit.

Because we know how stressful life can be when you need additional funds, Lanco Federal Credit Union provides lines of credit and home equity loans in Lancaster, PA, at an excellent rate for various purposes. For over 50 years, we have been helping residents in Lancaster County, PA, by providing affordable access to credit. So, to help you learn more about our lending options, we are answering seven frequently asked questions about home equity lines of credit (HELOC) and loans.

1. What is the Difference Between a Line of Credit and a Loan?

HELOCs and home equity loans are similar ways to get access to funds using the equity in your home as collateral. A home equity loan is for a specific amount of money given in a lump sum, and a line of credit is an open-ended borrowing option that allows you to access a source of funds as needed. Let’s look at some of the key differences and similarities in this table.

2. How Much Can I Borrow with a Home Equity Loan or HELOC?

As with any loan, the amount that you can borrow will depend on multiple factors such as your income, credit history, current debt obligations, and the collateral you can offer. For a home equity loan or line of credit, the collateral is the amount of equity available in your home.

At Lanco Federal Credit Union, we offer financing for up to 80% of the home’s value or up to 90% for borrowers with good credit. This percentage is also referred to as the Loan to Value (LTV) ratio. To calculate your available equity within these LTV maximums, multiply your home’s value by the LTV percent, then subtract your current mortgage balance. For example:

Value of Home [ $300,000 ] x 80% LTV [ 0.80 ] = [ $240,000 ]
[ $240,000 ] – Current Mortgage Balance [ $100,000 ] = Available Equity [ $140,000 ]

The loan amount must be at least $5,000 to open a home equity loan or HELOC with Lanco Federal Credit Union. The maximum amount is based on your qualifications, as described above. Additionally, a maximum credit limit of $100,000 applies to home equity lines of credit.

3. Who Can Get a HELOC or Loan?

Homeowners who typically have more than 20% equity in the homes may qualify for a HELOC or home equity loan. The more the mortgage is paid down, the more equity in the house is available as collateral to secure a line of credit or loan. It’s a great way to fund home improvements because the interest can sometimes be tax-deductible. Contact your tax professional for more information.

Home equity loan rates are typically lower than personal loan rates, so home equity lending is often a good choice for homeowners who need to fund a large purchase or expense such as home renovations or college tuition. You’ll also want to make sure you can afford the monthly payment since you may lose your house to foreclosure if you fail to make your loan payment.

4. When Can I Apply for a Home Equity Loan?

As previously stated, you can apply for a home equity loan once you have more than 20% equity available in your home. If you are at that point and need access to extra monetary resources, we encourage you to apply online for a home equity loan with our credit union near you.

5. Where is the Best Place to Go for Home Equity Loans in Lancaster, PA?

Lanco FCU, of course! As a credit union, we are a not-for-profit financial institution that provides banking services and affordable credit to its members through a cooperative business model. Simply put—we provide personalized banking services to our members with caring and friendly customer service. And since we’re part of your local community in Lancaster County, you can count on us to understand and share your values.

6. Why Should I Consider a Home Equity Loan?

There are a variety of reasons to consider a home equity loan. Typically, homeowners use the funding in a home equity loan or line of credit to fund:

• Home improvement projects
• Consolidate debt
• Pay off credit cards
• Upgrade appliances
• Cover tuition expenses
• Replace high-interest student loans with a fixed-rate loan

7. How Do I Start the Lending Process?

You’ll need to apply for our credit union’s membership if you’re not already a member to get started with the home equity lending process. You’ll also need proof of your income and verification of your employment status to apply for home equity lending. After submitting your online application, we’ll check your credit score and determine if you meet our qualifications. We’ll contact you with our decision within three days, and if pre-approved, review the next steps with you.

Contact Lanco FCU for All Your Banking and Loan Needs!

When it comes to finding affordable home equity loans near Lancaster, PA, Lanco FCU is your best option! Not only do we provide helpful, personalized services for our members, but we also are here to support you and your financial life goals. Whether to consolidate debt to a lower-interest loan or fund upgrades to your home, we want to be your financial partner, no matter where life takes you.

If you have any additional questions about how our loan process works or eligibility requirements, please feel free to contact us! Our bankers and lenders are more than happy to assist you through the lending process.