Credit Union Home Equity Line of Credit (HELOC)

When considering a home equity line of credit (HELOC), both credit unions and banks offer viable options. However, credit union HELOC loans often provide distinct advantages worth considering. 

Credit unions are known for giving members competitive interest rates and flexible terms since they’re member-owned organizations rather than profit-driven institutions. With a credit union HELOC, you’ll often find lower rates or fewer fees, and their community-focused approach means more personalized service throughout the borrowing process.

The timeline for securing a credit union HELOC typically ranges from 3 to 5 weeks, though this can vary based on your particular situation. To streamline the process, gather essential documentation beforehand, including proof of income, homeowners insurance and recent tax returns. 

Some credit unions may also require a good credit score for approval. Being prepared and responsive during the application process can help reduce your wait time significantly.

While both tap into your home’s equity, these financial products serve different needs. With a home equity loan, you get a single lump sum that comes with a fixed interest rate.

In contrast, a HELOC functions like a credit card. You can borrow as needed up to your approved limit, typically with a variable interest rate. You can use our loan or line of credit calculator to compare your options.

Credit unions typically look at several factors when evaluating HELOC loan applications. Important requirements usually include:

• Enough equity in the property: Most credit unions require you to have at least 20% equity in the home beyond what you borrow. For example, if your home is worth $400,000 and you owe $200,000 on your mortgage, you have $200,000 in equity, which could allow you to borrow up to $120,000 through a HELOC.
• Strong credit history and credit score: Credit unions typically look for a minimum FICO credit score of 620, though you’ll typically need higher for the best rates. Your credit history should show a pattern of responsible borrowing and on-time payments, especially for any existing mortgage or home-related loans.
• Low debt-to-income ratio: Most credit unions prefer a debt-to-income (DTI) ratio of 43% or lower, meaning your monthly debt payments shouldn’t exceed 43% of your monthly income. This includes your potential HELOC payment along with your existing mortgage, car loans, credit cards and other debt obligations.
• Verified steady income: Lenders will look for a stable income history, typically at least two years in the same job or industry. You’ll need to provide proof of income in the form of recent pay stubs, W-2s and tax returns to prove your ability to repay the loan consistently over time.
• Current property appraisal: An up-to-date appraisal confirms your home’s current market value, determining how much you can borrow. The appraisal should be performed by a licensed professional and typically needs to be under 6 months old at the time of application.

If you’re unsure about meeting these requirements, consider scheduling financial counseling to discuss your options.

Most credit unions allow you to borrow up to 80% of your home’s equity. From our earlier example, if your home has $200,000 in equity, you could potentially borrow up to $120,000. Before taking out a large loan, consider creating a budget to make sure you can manage the payments comfortably.

You can use a credit union HELOC loan for anything! A home equity line of credit gives borrowers flexibility in how they use the funds. Common uses include:

• Home improvements and renovations
• Education expenses
• Emergency fund establishment
• Debt consolidation
• Major purchases
• Vacation funding

Before using your HELOC, consider exploring how to save money first to ensure you only borrowing what you need.

Several factors influence your HELOC rates and terms:

• Credit score and history
• Income stability
• Debt-to-income ratio
• Loan amount requested
• Current market conditions
• Property value and location

If you’re not satisfied with your initial rate offer, consider refinancing later when your financial situation improves or market conditions change.