If you’re looking to save on interest or lower your monthly payments, using your home's equity for debt consolidation may be the answer. Here’s the step-by-step. Keep in mind that the examples below may not apply to your individual situation – but should give you a good idea of the process. Contact us or visit a branch with any questions.
1. Add up your debt
Add up all your debts — credit cards, student loans, medical bills and any other bill you plan to pay off using your home equity loan. Realize that it may take 30 days from application to funding, so take that into account when adding up your debts.
Because the total amount owed may not be reflected on your latest statement or via online banking, make sure to request the payoff amount from each lender. A payoff amount is how much you must actually pay to totally satisfy the debt – it will be the entire amount you owe, including interest through the day you intend to pay off the loan, plus any fees or costs. A payoff amount will be something like: “Payoff amount $15,684.53 good through 05/15/2020.” Be sure you’re requesting a payoff amount for the date the lender will receive your payment, not today’s date (unless the lender will get your payment today). If you’re planning on making more payments before the payoff date, keep those in mind, too.
For example, if the total of your debts is $15,684.53 based on a payoff date of May 15 and you plan to make additional payments of $500 before then (for instance, because of an automated payment in place), your total debt would be around $15,184.53.
2. Calculate how much of a home equity loan you’ll qualify for
Patelco will finance up to 90% of your home’s value – which includes the first mortgage (if any) and the new equity loan.
For example, if your property is worth $500,000 and has $300,000 owed on the first mortgage, Patelco may provide a home equity loan up to $150,000. (90% of $500,000 is $450,000, and $450,000 minus $300,000 is $150,000.) In another example, if your home is worth $200,000 and has $165,000 owed on the first mortgage, Patelco may provide a home equity loan up to $15,000. (Keep in mind that these figures are examples only, and that the final amount you qualify for will be based on a variety of factors, including your credit score.)
3. Understand the costs of a home equity loan or HELOC
At Patelco we offer equity lines of credit (HELOCs) up to $250,000 at no cost (some restrictions apply). For HELOCs over $250,000, closing costs will apply and can total up to around $2,500. We also make fixed amount home equity loans up to $500,000 at no cost (some restrictions apply).
If there is a cost to apply for and receive a home equity loan, those costs will typically be taken from the total funded, so you do not need this money upfront at the time you apply.
4. Check your rate in minutes.
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5. Get funded
The entire process takes around 30 days at Patelco. If you’re approved for a home equity line of credit (HELOC), you can begin accessing it as soon as your loan is funded by:
- making a transfer in online banking (your new HELOC will appear as an account)
- visiting a branch
- calling 800.358.8228 (select the option for existing home loans)
We’ll also mail you HELOC checks – these are a great way to pay off debts, but keep in mind that they will take a couple weeks to arrive at your home address after your loan has funded.
If you’re approved for a home equity loan in a fixed amount, your money will be deposited to your primary share account, and you can begin accessing it immediately at funding.
6. Pay off your debts
As noted above you have several options for paying off your debts – including Patelco checks (if you get a HELOC), a transfer via online banking, or writing checks from your checking account after transferring your loan funds into your Patelco checking account.
Whatever method you choose, pay off your debts as soon as possible – don’t let them accrue any additional interest. This will also help you resist the temptation to spend the money from your loan on expenses other than your debts.