As Home Values Rise, So Does Home Equity
Five Things to Know Before Borrowing Money Against Your Home
As home values rise and the housing market improves, home equity lines
of credit are becoming more popular again. Demand for these loans
substantially decreased during the housing crisis. However, now they are
making a major comeback as the preferred type of loan for consumers who
have more equity in their homes and have stayed in them longer than
anticipated.
Home equity lines of credit are making up the largest portion of home
loans since 2008, according to RealtyTrac data.*
“It’s a really smart way to borrow money,” said Nancy Elkus, vice
president, senior consumer lending product manager for Fifth Third Bank.
“Typically there are tax advantages and many consumers do not realize
that there is a lot of flexibility with a home equity line of credit.”**
Fifth Third is offering a home equity line of credit special through
July 31, 2016, with a 1.99 percent introductory annual percentage rate
for six months that adjusts to a variable rate as low as 3.24 percent
APR. **
Across the industry, the two most popular uses for a home equity line of
credit are: home improvement projects and debt consolidation, said
Elkus, who chairs the Home Equity Lending Committee for the Consumer
Bankers Association.
With a home equity line of credit, banks make a certain amount of money
available over a set period of time, with the consumer’s home used as
collateral. Before consumers consider a home equity line of credit,
Elkus recommends they consider these five things:
Know how much equity you have. Most people have more equity in
homes now than eight years ago. A report by the Federal Reserve Bank of
New York finds that Americans paid 8 percent less on their mortgages in
2015 than they did in 2008. At the same time, the amount of principal
paid off rose by 41 percent.
“You are seeing homeowners pay less each month on their mortgages,”
Elkus said, “while also building up their home equity.”
However, Elkus says a lot of consumers don’t know the value of their
homes or the amount of equity they have in them. Fifth Third offers an
equity calculator to estimate the value of your home at
53.com/mortgage/app/homevalue.
Learn your potential tax advantages. Interest paid on the first
$100,000 of a home equity line of credit is usually deductible; it
doesn’t matter how the money is used. Interest paid on amounts borrowed
above $100,000 is deductible if the money is used to make repairs and
improvements on the home, up to an additional $1 million. Always talk
with your accountant, Elkus advises, to ensure you qualify.**
Understand the flexibility a home equity line of credit allows. Consumers
don’t need to use home equity lines of credit for only home
improvements; they also can use them for other expenses. Popular uses
include consolidating high-interest debt, paying medical bills, buying
furniture, financing large purchases, paying tuition and covering
emergency expenses. The interest rate tends to be much lower than other
types of financing, Elkus said. She recommends people avoid using the
line of credit for everyday living expenses, especially considering that
in most cases, the line is secured by the consumer’s home.
Evaluate buying a new home versus staying in your existing home.
With housing inventory low in many regions, staying in your home may be
the best option, Elkus said. The cost to improve your home using a line
of credit secured by your home could be the least expensive way to get
the features you want. As you pay down the balance, the funds become
available to use again.
Know the true cost of the line of credit. Before you make a
decision, look at all of the costs to a home equity line of credit. Some
have origination fees or annual fees. Fifth Third is offering a 1.99
percent rate promotion for the first six months. There are no closing
costs; the annual fee is $65 which is waived for the first year.
*RealtyTrac Q4 2015 U.S. Residential Property Loan Origination Report.
**NOTICES & DISCLOSURES
Consult a tax advisor regarding deductibility of interest.
Offer subject to credit review and approval. The go to APR advertised is
for highest qualified borrowers with a credit score of at least 750 and
a line amount of $50,000 or more. The applicable interest rate varies
depending on credit qualifications, line amount, property state, lien
position and loan-to-value (LTV) ratio. $10,000 minimum line amount
required to open ($5,000 minimum line amount for simultaneous closing
with a Fifth Third mortgage or Easy Home Refinance) and a maximum line
amount of $500,000. LTV restrictions may vary by property location. The
term is 30 years, consisting of a 10-year draw period with interest-only
payments followed by a 20-year repayment period with principal+interest,
which may increase your monthly payments. After loan consummation, rates
are subject to change at any time. Interest rates accurate as of 3/1/16.
APRs may vary and are indexed to the Prime Rate as published daily in
The Wall Street Journal (Eastern Money Rates table. As of 3/1/16 the WSJ
Prime Rate is 3.50%. The maximum APR will not exceed 25% and the minimum
APR will never go below 2.74%. Preferred and Enhanced customers receive
an additional 0.25% discount, which is not reflected in the rate
advertised. Automatic payments from a Fifth Third checking account
through AutoBillpayer® are required to receive the 0.25% discount
reflected in the rate advertised. For condos, 3-4 unit and investment
properties, 0.25% will be added to your rate. If line is secured by a
condominium unit you may have to pay a fee between $0-$600 to your Home
Owner’s Association for the completion of the Condominium Questionnaire.
Annual fee of $65 waived for one year. Fixed rate lock fee is $95. Offer
not valid in Pennsylvania market. Rates and offer are subject to change
without notice. Checking accounts may have monthly fees. $50 minimum
deposit required to open new checking account.
For OH, WV, KY, IN, IL, MI:
Based on the example: interest rate is a variable APR of prime -0.26%,
currently 3.24% and is based on a line amount of $70,000 in first lien
position. Maximum LTV is 70%. Interest-only payment on $70,000 balance
during the draw period is $192.62; Principal+interest payment for the
first month of the repayment period is $484.29. Variable Interest rate
ranges: For a line amount of $10,000-$49,999 from prime +0.74%
(currently 4.24%) to prime +2.59% (currently 6.09%); $50,000+ from prime
– 0.26%(currently 3.24%) to prime + 1.99% (currently 5.49%).
For FL, GA:
Based on the example: interest rate is a variable APR of prime + 0.24%,
currently 3.74% and is based on a line amount of $70,000 in first lien
position. Maximum LTV is 70%. Interest-only payment on $70,000 balance
during the draw period is $222.35; Principal+interest payment for the
first month of the repayment period is $514.02. Variable Interest rate
ranges: For a line amount of $10,000-$49,999 from prime + 0.99%
(currently 4.49%) to prime + 3.49% (currently 6.99%); $50,000+ from
prime + 0.24% (currently 3.74%) to prime + 2.99% (currently 6.49%). In
Florida doc stamps and intangible taxes apply and the bank pays these on
the borrower’s behalf. In Georgia intangible taxes apply and the bank
pays these on the borrower’s behalf.
For NC, TN:
Based on the example: interest rate is a variable APR of prime + 0.24%,
currently 3.74% and is based on a line amount of $70,000 in first lien
position. Maximum LTV is 70%. Interest-only payment on $70,000 balance
during the draw period is $222.35; Principal+interest payment for the
first month of the repayment period is $514.02. Variable Interest rate
ranges: For a line amount of $10,000-$49,999 from prime +0.74%
(currently 4.24%) to prime + 2.59% (currently 6.09%); $50,000+ from
prime + 0.24% (currently 3.74%) to prime +1.99% (currently 5.49%). In
Tennessee indebtedness taxes apply and the bank pays these on the
borrower’s behalf.
About Fifth Third:
Fifth Third Bancorp is a diversified financial services company
headquartered in Cincinnati, Ohio. The Company has $141 billion in
assets and operates 1,254 full-service Banking Centers, including 95
Bank Mart® locations, most open seven days a week, inside
select grocery stores and 2,593 ATMs in Ohio, Kentucky, Indiana,
Michigan, Illinois, Florida, Tennessee, West Virginia, Pennsylvania,
Missouri, Georgia and North Carolina. Fifth Third operates four main
businesses: Commercial Banking, Branch Banking, Consumer Lending, and
Investment Advisors. Fifth Third also has an 18.3% interest in Vantiv
Holding, LLC. Fifth Third is among the largest money managers in the
Midwest and, as of December 31, 2015, had $297 billion in assets under
care, of which it managed $26 billion for individuals, corporations and
not-for-profit organizations. Investor
information and press
releases can be viewed at www.53.com.
Fifth Third’s common stock is traded on the NASDAQ® Global Select Market
under the symbol “FITB.” Fifth Third Bank was established in 1858.
Member FDIC
Copyright © 2016. Fifth Third Bank, Member FDIC, Equal Housing Lender,
All Rights Reserved.
Fifth Third Bancorp
Laura Trujillo, 513-534-4361
Laura.trujillo@53.com