8 Common HELOC Questions

Home equity is the value of your home minus the amount you still owe on your mortgage. For example, if you have a home that's currently valued at $500,000 but you still owe $200,000 on the mortgage, that means you have $300,000 of equity in your home. Equity is commonly referred to as the portion of something that you own. So, in this case, you "own" $300,000 of your home. Your equity can increase as you continue paying down the mortgage and if your home value goes up. 

A home equity line of credit (HELOC) is a revolving line of credit, much like a credit card. The difference is that the borrower's house is used as collateral for the loan. Because of this, the amount they're allowed to borrow from a HELOC depends on how much equity they have in their home. In other words, the more equity you have, the bigger HELOC you may be approved for. Once approved, you can use the funds from the HELOC as needed.

To be approved for a Cyprus HELOC, you'll typically be required to have at least $10,000 of equity in your home. For applicants with a minimum of $50,000 in equity, Cyprus Credit Union may approve a HELOC of up to 100% of a home’s value. The less equity you have in your home, the smaller amount you may be approved for.

HELOCs are divided into two terms: the draw term and the repayment term.

The draw term is the time frame when you can make use of the loan and "draw" funds from it to pay for your expenses as needed. During this time, payments toward the principal you've borrowed usually aren't due. However, you'll still have to make payments on any interest that has accrued. Draw terms on Cyprus HELOCs may last up to 10 years.

Once the draw term is over, the repayment term begins. During the repayment term, you'll make payments on both interest and principal. At Cyprus Credit Union, the repayment term is five years for traditional HELOCs and 10 years for interest-only HELOCs.

The most popular and convenient method of accessing the funds in your Cyprus HELOC is with a Cyprus credit card. You can also access funds on your online Home Banking account and the Cyprus CU Mobile Banking app.

Just like any other type of loan, your credit score plays a major role in whether or not you’ll be approved for a Cyprus HELOC. A credit score of at least 660 is a good start if you’re considering Cyprus Credit Union as your lender. Keep in mind that other factors can also play a role in determining approval, such as your debt-to-income ratio and loan-to-value ratio. If you’re worried about your current credit history and score, check out our tips for building your credit.

HELOCs have some attractive benefits. If a borrower fails to meet the loan conditions, however, the consequences can be serious, including foreclosure. For this reason, there are two things to keep in mind: (1) Using a HELOC responsibly is crucial to protecting your home and financial well-being, and (2) if you find yourself in financial trouble and are worried you may not be able to pay on the loan, reach out to let your lender know and to see if there are any arrangements that can be made.