8 Common HELOC Questions

4 min read
March 12, 2024


Whether you're a Utah homeowner looking to tap into your property's equity or you'd simply like to understand how a home equity line of credit (HELOC) works, Cyprus has you covered. Below, we shed some light on eight common questions homeowners have about HELOCs, from how they work to their potential benefits and risks. 

What is home equity?

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. 

What is a HELOC?

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.

What can a HELOC be used for?
While HELOCs are commonly used to fund home improvements, remodels, or renovations, the money can also be used to pay for other big-ticket expenses, such as weddings and family vacations. As long as you know you can meet the obligations of the loan comfortably, there's a lot the funds can be used for. It's even better if the money can be used to pay for things that could benefit you financially going forward, such as:

Home Improvements
Investing in your home can increase its value and make it more comfortable for you and your family.

Debt Consolidation
Paying off high-interest debts with a home equity loan can help you save money on interest payments. Learn how here.

Education Expenses
Using a home equity loan to fund education can be an investment in your future.
How much home equity do I need before getting a HELOC?

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.

How do a HELOC's draw & repayment terms work?

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.

How do I access the funds in my HELOC?

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.

What should my credit score be to apply for a HELOC?

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.

What should I consider before applying for a HELOC?

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.


Apply Now

Apply here or visit our Home Equity Loans page for more information. Our team of home equity experts is here to guide you every step of the way.


Contact a Cyprus home equity loan advisor at 801-260-7600 (ext. 5330) or email HomeEquity@CyprusCU.com.

The above article is for informational and educational purposes only. Membership and eligibility requirements apply in order to be approved for a Cyprus Credit Union HELOC or other Cyprus product. The information in this article is correct as of its publish date. If you have any questions or would like to verify that the information above is still correct, please contact Cyprus Credit Union Home Loans using the contact information in the Questions? section.