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A Home Equity Line of Credit can be the key to funding your dreams. We’re ready to help guide you through the process.

Whether you’re looking to renovate your home, consolidate your debt or finance major expenses, a Citizens Bank Home Equity Line of Credit is a smart way to use the equity in your home to fund the important things in your life.

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Guide to Home Equity Financing

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  • When looking at a home equity loan vs line of credit the main differences are:
    • A home equity loan has a fixed-rate. A line of credit has a variable interest rate that adjusts with the Prime Rate.
    • With a home equity loan, you make fixed payments of principal and interest. With a home equity line of credit, you only need to make interest payments during the draw period.
    • With a home equity loan, you get the entire loan amount in one lump sum. By contrast, a line of credit is available for a long-term draw period, which you can access with home equity line of credit checks or through online banking. If you pay down principal during your draw period, you can borrow that principal again if you want to.
  • We almost always require an appraisal to qualify for a home equity loan or line of credit. After we review your application and collateral information, we will determine the type of appraisal needed and talk to you about how it will get done.
  • That depends mostly on you. Be sure to promptly respond to any requests we make for additional documents needed to complete your application. Typically it takes about 45 days from application to funding, but can vary depending on your individual situation.
  • Home equity lines of credit require interest-only payments during the initial draw period. After the draw period both principal and interest payments are required on the outstanding balance. Home equity loans are paid in full over the life of the loan, in equal monthly payments that contain both principal and interest. For both home equity products, you can always make additional payments toward principal.
  • Interest you pay on a loan that is secured by your primary residence may be tax deductible. Consult with a tax advisor to determine whether the interest you pay is eligible.
  • When reviewing your application information, an underwriter examines three main factors to assess whether you qualify for the loan and is also used to determine your interest rate:
    1. Your credit history (FICO score)
    2. Your loan-to-value ratio
    3. Your debt-to-income ratio
  • There's no way to say what your exact interest rate will be on your home equity loan or line of credit until your application is completed, but we will give you our best estimate based on preliminary factors. Your final interest rate is based on factors such as your credit history (FICO score) and ability to repay, the value of your home and the loan or line amount, to name a few.
  • Determining equity is simple. Take your home's value, and then subtract all amounts that are owed on that property. The difference is the amount of equity you have.

    To determine your home’s value, use your best guess or find a home value estimator. We can also help you determine your home’s current worth.

    Ex: If you have a property worth $200,000, and the total mortgage balances owed on the property are $120,000, then you have a total of $80,000 in equity.

  • LTV stands for loan-to-value. It is the total amount of liens on the property divided by its fair market value.

    LTV is used to determine how much you are eligible to borrow and is one of the factors used in determining your interest rate. A lender typically allows you to borrow up to 80% LTV. The lender will multiply the lower of the purchase price or the estimated market value by 80%, then subtract the outstanding liens on the property. The remaining balance represents your available equity. Keep in mind that LTV requirements may vary by state and lender.

    Ex: Using the example from the FAQ above, if a lender typically allows you to borrow up to 80% LTV, then you would be eligible to borrow $40,000 in equity.

  • When you first apply for a home equity loan, just take your best guess as to your home's value. If you want to try to be more specific, you can use a home value estimator or talk to a Home Loan Originator for other methods of trying to determine this amount. However, we will determine the value during your application process.
  • The two biggest factors when borrowing a home equity loan or line of credit are the amount of equity you have in your home and your credit score. Another factor is your debt-to-income ratio (how many bills and obligations you have compared to your income). To calculate your debt-to-income ratio, write down all of your monthly debts (don't worry about utilities or your television service), then divide that amount by your monthly gross income. This will give you a general estimate of your debt-to-income ratio.