Borrowing know-how

Understanding home equity loan options

It is important to look at both sides of your balance sheet – your short- and long- term goals as well as your borrowing needs. When you understand the different borrowing options available to you, you're able to make informed decisions to help achieve your financial goals. As your Private Client Group Relationship Manager, I can help you get started.

When I first started to work in banking, I attended training classes to learn about different lending options and why one option may be better than another depending upon the client and his or her unique situation. That information has been invaluable as I listen to my clients and help them determine the best course of action to help meet their short- and long-term goals.

Given the choice of home equity products available, I thought it would make sense to briefly highlight some of the differences and similarities between them. One thing to be aware of is that with any type of home equity loan you are basically using your house as collateral and borrowing against the equity in your home.

After you read this, I would be happy to meet to discuss these options and any ways you can take advantage of today's historically low interest rates

Home Equity Installment Loan (HEIL)

A home equity installment loan is essentially a second mortgage. You borrow a lump sum of money and pay it back in fixed monthly installments over a fixed period of time anywhere from 5-30 years. Home equity installment loans have a fixed interest rate that you lock in when you secure the loan.

  • A home equity installment loan is recommended if you need an exact amount of money for a one-time project and you want to pay the money back over a specific time frame at a fixed interest rate.
  • Examples would include refinancing your mortgage, paying for a major home improvement, education expenses or possibly paying off high-interest credit card debt. The benefit of a fixed rate HEIL is a predictable monthly payment over the life of the loan.

Home Equity Line of Credit (HELOC)

A home equity line of credit is a revolving line of credit up to a certain limit, and is more like a credit card. Once approved, you decide when to borrow and how much to borrow by writing a check or transferring funds online. As you pay down your line of credit balance, you can borrow again up to your credit limit.

  • A home equity line of credit may be utilized to pay various expenses over a period of time – such as a larger home improvement project. A HELOC has a variable interest rate, tied to The Wall Street Journal prime rate, and you only pay interest on the amount you use. For example, if you have a $100,000 line of credit and only borrow $25,000 initially, you only pay interest and principal on the $25,000 borrowed and you still have $75,000 available to borrow.
  • Consider PNC's Choice Home Equity Line of Credit. PNC may be able to offer an enhancement to a HELOC. Certain states permit customers to convert part of their outstanding balance to a fixed-interest rate and payment.

Home Equity Installment Loan (HEIL)

Borrowing Know-how

Many Choices and Many Right Answers

The interest you pay on these types of loans may be tax-deductible3.

Both of these home equity options require you to use your home as collateral for the loan. This may put your home at risk if you cannot make your monthly payments, so make sure you don't borrow more than you can afford to pay back.

No one loan is right for every homeowner and every situation. Let's work together to see if you are taking advantage of the best product and rate available given today's environment.

1. Your Annual Percentage Rate (APR) will be based on a review of the initial credit criteria, Loan to Value (LTV) ratio and Loan Size. Loans and lines are subject to credit approval.
2. Visa is a registered trademark of Visa International.
3. Consult your tax advisor.