Home Buying, Refinancing and Home Equity FAQs

Get answers to frequently asked questions about buying a home and getting a mortgage, refinancing and using the equity in your home.

  • FAQs for Home Buyers

      What are closing costs? What is an escrow account? What are mortgage points? How does LTV affect you? Discover the answers to these mortgage questions and more below.

    • Should I get a fixed rate or an adjustable rate?

      On a fixed-rate loan, the interest rate doesn’t change over the life of the loan. An adjustable-rate mortgage (ARM) has an interest rate that is fixed for a set number of years and then afterwards will go up or down based on a market index such as the LIBOR. Stands for the London Interbank Offered Rate. The British Bankers Association uses information gathered from a survey of multiple lending institutions to determine LIBOR. Consider factors such as the length of time you plan to stay in your home. If you plan to stay in your home for a long period of time, a fixed-rate may be better for you. Otherwise, an adjustable-rate might be better if you plan to sell your home before the rate becomes variable, since initial ARM rates are typically lower than fixed-rate mortgages.

      Find more information regarding fixed-rate mortgages versus ARMs

    • Do I want an interest-only loan?

      Interest-only loans are not for everyone, and because of the risks, the pros and cons of an interest-only loan should be considered thoroughly. With an interest-only loan, borrowers make only monthly payments of interest for a set number of years before they begin to make principal payments. During this period, you won’t build any additional equity in your home unless the home appreciates in value. When the interest-only period ends, your mortgage payment will increase, often substantially, to ensure the outstanding principal balance is repaid before the loan term ends. If you are comfortable with managing the risks, an interest-only loan does provide some flexibility in managing month-to-month cash flow.

      The interest-only feature is not offered on all loan products and is only available to those who are well qualified. Contact one of our Home Loan Originators to ask any mortgage questions and see if this option is right for you.

    • How can I get pre-approved?

      Contact us to get started with your mortgage pre-approval. We’ll get some preliminary information from you, review it and determine whether you might qualify for a loan. Once you get your mortgage pre-approval, you’ll know how much you could borrow and can look for a new home with confidence. Sellers will also feel more comfortable knowing that they have a serious buyer.

    • What is an appraisal?

      An appraisal is a type of valuation developed by an independent, unbiased, qualified, and licensed or certified professional. Appraisals and valuations are opinions of the market value for the property used as collateral for the requested loan. Written reports of appraisals are sometimes referred to simply as "appraisals."

    • Do I need a home appraisal?

      In almost all situations, a home appraisal will be needed. The appraisal helps a lender determine the market value of the home you are considering purchasing. Since the property will be used as collateral against the mortgage, lenders want to make sure the house is worth at least as much as the loan amount you’re seeking.

    • What does "market value" mean?

      Market value is the likely selling price of a home with a willing buyer and a willing seller on the open market.

    • Will I be provided a copy of the appraisal?

      Lenders are required to provide applicants with all completed appraisals and written valuations related to their first-lien mortgage and home-equity loan and line applications.

    • What is a comparable sale?

      A comparable sale is a property that has recently sold and is similar to the subject property in most respects, including size, location and amenities. The selection of comparable sales is an important determining factor in providing an opinion of market value. It is the appraiser's responsibility to adequately research the local real-estate market and to determine which comparable sales best represent the value characteristics of the subject property.

    • How fast will I get my money?

      This is one of the most important mortgage questions. When you’re buying a home, the funds are available on the day you close your loan. On a refinance, funds are normally disbursed on the fourth business day after you sign your loan documents. This is because federal regulations require a three-day rescission period, during which you have the right to cancel your loan outright.

    • What are mortgage points?

      Points, also known as discount points or mortgage points, are a one-time fee that you can choose to pay to get a lower interest rate. One point equals one percent of your loan amount and will usually result in a rate that is one-eighth to one-quarter of a percent lower.

      To determine if you should buy points, use our Mortgage Points Calculator.

    • What is the difference between interest rate and APR?

      The interest rate is the cost to actually borrow the money disbursed in the loan. In addition to the interest, the APR (annual percentage rate) adds in some of the upfront costs of getting the loan, including points and lender fees.

    • What is pre-paid interest?

      When you make your mortgage payment on the first of the month, you are actually paying for interest charges that accumulated during the previous month (also called "paying in arrears"). For example, a mortgage payment due on August 1 would cover the interest charged from July 1 to July 31.

      As the name indicates, "pre-paid" interest is paid in advance. It is the per diem interest charges that begin accumulating on the day your loan is closed until the end of the month in which the closing occurred.

      So, for example, if your loan closed on June 15, the pre-paid interest would be calculated based on the number of days left in the month of June, or 15 days (June 16 through June 30).

      Using this same scenario, your first monthly mortgage payment would be due on August 1. The August 1 payment would cover interest charges that occurred between July 1 and July 31 (covering the days after the pre-paid interest period ended).

    • What are closing costs*?

      Closing costs include items like title insurance fees, attorney fees, pre-paid interest and documentation fees – to name a few. These items vary for each customer due to differences in the type of mortgage, the property location and other factors.

      You’ll receive a Good Faith Estimate explaining your closing costs when you formally apply for your mortgage. You'll also receive a HUD-1 Settlement Statement before closing that will list all of the costs, credits and fees needed to complete the purchase of the home. It’s similar to the Good Faith Estimate however the costs have been finalized at that point.

    • Should I pay my closing costs* out of pocket?

      In most cases when you are getting a mortgage to buy a home, you will need to pay some closing costs out of pocket. However, sometimes you can choose to accept an interest rate higher than what you would normally qualify for in exchange for a lender credit to offset a portion of those closing costs. This will result in a higher monthly mortgage payment, so you have to weigh the pros and cons to determine what works best for your situation. Speak to your Home Loan Originator about your personal circumstances to find the right solution.

    • What amounts are included in my monthly payments?

      Principal & Interest

      With most mortgages, your monthly mortgage payment will include amounts that go toward loan principal and interest. For an interest-only mortgage, monthly payments will include only the interest that is due on the outstanding principal balance, until the interest-only period ends.

      Mortgage Insurance (MI)

      If your home loan requires mortgage insurance, such as private mortgage insurance or PMI, your monthly payment will usually include a mortgage insurance premium.

      Real Estate Taxes and Insurance

      Your monthly payment may include a portion to cover real estate taxes, homeowners insurance and, if applicable, flood insurance. This money will be held in an escrow account An escrow account is a separate account that your lender sets up to hold the money it collects each month for your real estate taxes, homeowners insurance premiums and, if applicable, flood insurance and/or mortgage insurance. The lender takes your estimated annual real estate taxes and insurance premium expenses and divides that amount by 12. This amount is added to your monthly mortgage payment. , and we’ll pay your real estate tax and insurance bills on your behalf when they are due.

      Remember, no matter the type of mortgage you have, you can always make additional payments toward principal without a penalty. That will help you pay off your loan more quickly.

    • What is PMI?

      If you’re buying a home, and have less than a 20% down payment, mortgage insurance, such as private mortgage insurance or PMI is usually required. The mortgage insurance premium is typically included in your monthly mortgage payment.

    • Do I need a down payment?

      Citizens Bank offers low down payment options for several mortgage programs. What products are available to you will ultimately depend on your ability to qualify as well as which loan program best meets your needs. Contact a Home Loan Originator to answer your mortgage questions and discuss your options.

      Check out our mortgage down payment tips.

    • Can I lock my interest rate when shopping for a home?

      For first mortgages, Citizens does not always require a property address to lock a rate. However, once we lock the rate we’ll need a property address within 30 days. Speak with a Home Loan Originator for specific details on locking your interest rate. Restrictions may apply.

    • What is LTV and why does it matter?

      LTV stands for loan-to-value. It’s used to determine how much you are eligible to borrow and whether mortgage insurance, such as PMI, will be required. It’s also one of the factors used in determining your interest rate.

      It equals:
      The total dollar amount of mortgages on your property
      Divided by
      The property’s fair market value.

      When you’re buying a house, the fair market value will be the lower of purchase price or the estimated market value as established by the appraisal.

    • How do I find out my home's value?

      There are many sources online that can tell you what other homes in the neighborhood are selling for and you can usually check with the local tax authority to find out what the last tax assessment was for the property. However, we will verify the value of the home during loan processing by ordering an appraisal during the application phase of the mortgage process.

    • Is my interest tax deductible?

      Interest you pay on a loan that is secured by your primary residence may very well be tax deductible. Consult with a tax advisor to find out whether the mortgage interest will be tax deductible in your situation.

    • How does the lender determine if I qualify for the loan?

      When reviewing your application information, an underwriter examines three main factors to assess whether you qualify for the loan and also in some cases to determine your interest rate:

      1. Your credit history (including FICO score)
      2. Your property value and
      3. Your debt-to-income ratio (the amount of income and assets you have compared to your outstanding debts)
    • What will my rate be?

      There are many factors that impact what interest rate you will be offered – from daily changes in the market to individual qualifications. There’s no way to say what your exact interest rate will be until your application is completed, but we will give you our best estimate based on preliminary factors. Your final interest rate will be influenced by where the market is when you apply as well as factors such as the loan purpose (purchase or refinance), your credit history (FICO score), the value of your home and the loan amount, to name a few.

    • Do I need to have perfect credit?

      If your credit score is high you may receive better rates and have more options available to you. But simply having some credit issues in the past won’t necessarily disqualify you from getting a mortgage. However, your credit history needs to demonstrate both willingness and ability to repay on time.

    • What is an escrow account and how does it work?

      An escrow account ensures your real estate tax and insurance bills are paid in full and on time, without you having to save large amounts of money and keep track of due dates. An escrow account is a separate account that your lender sets up to hold the money it collects each month for your real estate taxes, homeowner’s insurance premiums, and if applicable, flood insurance and/or mortgage insurance. The lender takes your estimated annual real estate taxes and insurance premium expenses and divides that amount by 12. This amount is added to your monthly mortgage payment.

      Your real estate and insurance bills are sent directly to the lender and they are paid on your behalf with the escrowed funds.

    • Am I required to have an escrow account on my loan?

      That depends on factors such as the loan program you choose and the amount of down payment you make. When you apply for your loan, we will let you know whether or not an escrow account will be required. If it is, we’ll give you an estimate of the monthly escrow payments you will need to make.

    • What types of bills are paid out of an escrow account?

      Typically, bills paid out of an escrow account will be for real estate taxes and required insurance premiums, which may include homeowners insurance and, if applicable, flood insurance and/or private mortgage insurance. Escrow accounts usually do not cover funds for interim bills, homeowner association fees, non-required insurance, special or added tax assessments, supplemental tax bills or any type of non-real-estate-based taxes unless they are included on real estate tax bills.

    • How will you determine how much my property tax and insurance payments will be?

      We typically estimate the real estate tax portion of your escrow based on the most recent tax assessment on the property and your homeowner’s insurance based on information provided by your insurance company.

    • Will the monthly amount you collect for my escrow account change?

      The amount we collect each month may change based on increases and decreases to your real estate taxes and/or insurance premiums. We’ll review your escrow account at least once a year, then we’ll notify you of any changes to your required escrow payment in an Escrow Account Disclosure Statement.

  • Home Refinance FAQs

      Receive answers to frequently asked questions about refinancing your mortgage. Whether you are trying to decide when to refinance, or even if you should refinance your mortgage, this page and a Citizens Bank Home Loan Originator can help you find the right answer.

    • Why should I refinance?

      There are numerous reasons customers refinance the loans they already have. Some of these are:

      • To lower the monthly payment
      • To lower the interest rate
      • To switch from an adjustable-rate to a fixed-rate, or vice versa
      • To refinance for a higher amount in order to pay off other debts or get cash
      • To change the remaining term of the loan

      Whatever your needs, we can help you determine whether to refinance and which loan is best for you.

    • Should I get a fixed rate or an adjustable rate?

      On a fixed-rate loan, your interest rate will not change. An adjustable-rate mortgage (ARM) has an interest rate that is fixed for a set number of years and then afterwards will go up or down based on a market index such as the LIBOR Stands for the London Interbank Offered Rate. The British Bankers Association uses information gathered from a survey of multiple lending institutions to determine LIBOR rates. . When deciding which loan option will be best for you, consider factors such as the length of time you plan to stay in your home. However, if you will be in your home for a long period of time, a fixed-rate may be better for you. Otherwise, an adjustable-rate may be better if you plan to sell your home before the rate becomes variable, since initial ARM rates are typically lower than fixed-rate mortgages.

      Discover more about fixed versus adjustable mortgage refinance rates.

    • Do I want an interest-only loan?

      Interest-only loans are not for everyone, and because of the risks, the pros and cons of an interest-only loan should be considered thoroughly. If you prefer lower payments, borrowers on an interest-only loan make only monthly payments of interest for a set number of years before they begin to make principal payments. During this period, you won’t build any additional equity in your home unless the home appreciates in value. When the interest-only period ends, your mortgage payment will increase to include principal to ensure the outstanding balance gets repaid. This increase is often substantial. If you are comfortable with managing the risks, an interest-only loan does provide some flexibility in managing month-to-month cash flow.

      The interest-only feature is not offered on all loan products and is only available to those who are well qualified, so contact one of our Home Loan Originators to see if this option is right for you.

    • What is an appraisal?

      An appraisal is a type of valuation developed by an independent, unbiased, qualified, and licensed or certified professional. Appraisals and valuations are opinions of the market value for the property used as collateral for the requested loan. Written reports of appraisals are sometimes referred to simply as "appraisals."

    • Will I need a home appraisal?

      In almost all situations, a home appraisal will be needed. The appraisal helps a lender determine the fair market value of the home you will mortgage with your refinancing. Since the property will be used as collateral against the mortgage, lenders want to make sure the house is worth at least as much as the loan being requested.

    • What does "market value" mean?

      Market value is the likely selling price of a home with a willing buyer and a willing seller on the open market.

    • Will I be provided a copy of the appraisal?

      Lenders are required to provide applicants with all completed appraisals and written valuations related to their first-lien mortgage and home-equity loan and line applications.

    • What is a comparable sale?

      A comparable sale is a property that has recently sold and is similar to the subject property in most respects, including size, location and amenities. The selection of comparable sales is an important determining factor in providing an opinion of market value. It is the appraiser's responsibility to adequately research the local real-estate market and to determine which comparable sales best represent the value characteristics of the subject property.

    • How fast will my money be available?

      On a refinance, funds are normally disbursed on the fourth business day after you sign your loan documents. This is because federal regulations require a three-day rescission period. That means you have three business days to change your mind and cancel your loan outright.

    • What are points?

      Points, also known as discount points or mortgage points, are a one-time fee that you can choose to pay to get a lower interest rate. One point equals one percent of your loan amount and will usually result in a rate that is one-eighth to one-quarter of a percent lower.

      If you need help determining whether you should buy points when refinancing, use our Mortgage Points Calculator.

    • What is the difference between interest rate and APR?

      The interest rate is the cost to actually borrow the money disbursed in the loan. In addition to the interest, the APR (annual percentage rate) adds in some of the upfront refinance costs of getting the loan, including points and lender fees.

    • What is pre-paid interest?

      When you make your mortgage payment on the first of the month, you are actually paying for interest charges that accumulated during the previous month (also called "paying in arrears"). For example, a mortgage payment due on August 1 would cover the interest charged from July 1 to July 31.

      As the name indicates, "pre-paid" interest is paid in advance. It is the per diem interest charges that begin accumulating on the day your loan is closed until the end of the month in which the closing occurred. In a refinance transaction, pre-paid interest is calculated from the time the new loan is funded because of the three-day rescission period.

      So, for example, if your loan closed and funded on June 15, the pre-paid interest would be calculated based on the number of days left in the month of June, or 15 days (June 16 through June 30).

      Using this same scenario, your first monthly mortgage payment would be due on August 1. The August 1 payment would cover interest charges that occurred between July 1 and July 31 (covering the days after the pre-paid interest period ended).

    • What are closing costs?

      Closing costs include items like title insurance fees, attorney fees, pre-paid interest and documentation fees – to name a few. These items vary for each customer due to differences in the type of mortgage, the property location and other factors. You’ll receive a Good Faith Estimate explaining your closing costs when you formally apply for your mortgage. You'll also receive a HUD-1 Settlement Statement before closing that will list all of the costs, credits and fees needed to complete the mortgage refinance. It’s similar to the Good Faith Estimate however the costs have been finalized at that point.

    • Should I pay my closing costs out of pocket when I refinance?

      When you refinance, you can pay the fees out of pocket or sometimes roll them into the loan amount.

      If you have the cash on hand, then consider paying the costs out of pocket. This will keep your monthly payment lower. If you roll the fees into the loan amount, this will increase your monthly payment, but the increase is usually nominal.

    • What will be included in my monthly payments?

      Principal & Interest

      With most mortgages, your monthly mortgage payment will include amounts that go toward loan principal and interest. For an interest-only mortgage, monthly payments will include only the interest that is due on the outstanding principal balance until the interest-only period ends.

      Mortgage Insurance (MI)

      If your home loan requires mortgage insurance, such as private mortgage insurance or PMI, your monthly payment will usually include a mortgage insurance premium.

      Real Estate Taxes and Insurance

      Your monthly payment may include a portion to cover real estate taxes, homeowners insurance and, if applicable, flood insurance. This money will be held in an escrow account, and we’ll pay your real estate tax and insurance bills on your behalf when they are due.

      Remember, no matter the type of mortgage you have, you can always make additional payments toward principal without a penalty. That will help you pay off your loan more quickly.

    • What is PMI?

      If you’re refinancing a first mortgage, and have less than 20% equity in your home, mortgage insurance, such as private mortgage insurance or PMI, is usually required. The mortgage insurance premium is typically included in your monthly mortgage payment.

    • Can I lock my interest rate?

      Yes. Typically you can lock your interest rate at any time between application and up to five days before closing. Talk to your Home Loan Originator for details about how and when to lock your rate.

    • What is LTV and how does it affect my refinancing?

      LTV stands for loan-to-value. It’s used to determine how much you are eligible to borrow and whether mortgage insurance, such as PMI, will be required. It’s also one of the factors used in determining your interest rate.

      It equals:
      The total dollar amount of mortgages on your property
      Divided by
      The property’s fair market value.

      When refinancing, the fair market value will be established by the appraisal.

    • How can I find out my home's value?

      When you first apply for a loan, give your best guess as to your home's value. A good starting point for determining your home’s value is by looking at your most recent tax assessment. Or you can also talk to a Home Loan Originator about other methods of figuring out the value. However, we will verify the market value of your home as part of the application process.

    • Is my interest tax deductible?

      Interest you pay on a loan that is secured by your primary residence may very well be tax deductible. Consult with a tax advisor to find out whether the mortgage interest will be tax deductible in your situation.

    • How does the lender determine if I qualify for the loan?

      When reviewing your application information, an underwriter examines three main factors to assess whether you qualify for the loan:

      1. Your credit history (including FICO score)
      2. Your property value and
      3. Your debt-to-income ratio (the amount of income and assets you have compared to your outstanding debts)
    • What will my rate be?

      This is an important question when asking yourself, "Should I refinance my mortgage?" There are many factors that impact what interest rate you will be offered – from daily changes in the market to individual qualifying. There’s no way to say what your exact interest rate will be until your application is completed, but we will give you our best estimate based on preliminary factors. Your final interest rate will be influenced by where the market is when you apply as well as factors such as the loan purpose (purchase or refinance), your credit history (FICO score), your home’s value and the loan amount, to name a few.

    • Is a perfect credit score important when I refinance?

      If your credit score is high you may receive better rates and have more options available to you. But simply having some credit issues in the past won’t necessarily disqualify you from refinancing. However, your credit history needs to demonstrate both willingness and ability to repay on time.

    • What is an escrow account and how does it work?

      An escrow account ensures your real estate tax and insurance bills are paid in full and on time, without you having to save large amounts of money and keep track of due dates. An escrow account is a separate account that your lender sets up to hold the money it collects each month for your real estate taxes, homeowners insurance premiums and, if applicable, flood insurance and/or mortgage insurance. The lender takes your estimated annual real estate taxes and insurance premium expenses and divides that amount by 12. This amount is added to your monthly mortgage payment.

      Your real estate and insurance bills are sent directly to the lender and they are paid on your behalf with the escrowed funds.

      If you had an escrow account on your previous loan, it is very likely that your lender will set up an escrow account for your new loan.

    • Am I required to have an escrow account on my loan?

      That depends on factors such as the loan program you choose and the amount of down payment you make. When you apply for your loan, we will let you know whether or not an escrow account will be required. If it is, we’ll give you an estimate of the monthly escrow payments you will need to make.

    • What types of bills are paid out of an escrow account?

      Typically, bills paid out of an escrow account will be for real estate taxes and required insurance premiums, which may include homeowners insurance and, if applicable, flood insurance and/or private mortgage insurance. Escrow accounts usually do not cover funds for interim bills, homeowner association fees, non-required insurance, special or added tax assessments, supplemental tax bills or any type of non-real-estate-based taxes unless they are included on real estate tax bills.

    • How will you determine how much my property tax and insurance payments will be?

      We typically estimate the real estate tax portion of your escrow based on the most recent tax assessment on the property and your homeowner’s insurance based on information provided by your insurance company. We may also use the escrow information from your previous mortgage.

    • Will the monthly amount you collect for my escrow account change?

      The amount we collect each month may change based on increases and decreases to your real estate taxes and/or insurance premiums. We’ll review your escrow account at least once a year, then we’ll notify you of any changes to your required escrow payment in an Escrow Account Disclosure Statement.

    • How can I get further information about an existing escrow account?

      If you have an existing escrow account with us, log in to our mortgage servicing website for helpful answers to FAQs. You will also find information about your existing mortgage loan, including balance and payment details, as well as contact information if you have additional refinancing questions.

  • Home Equity Loan and Line of Credit FAQs

      Learn more about using home equity through these frequently asked questions.

      From questions like what is a home equity loan to comparing home equity loans vs. lines of credit, these FAQs will give you a better understanding of home equity financing to help you make the right borrowing decision.

    • What are the differences between a home equity loan and a home equity line of credit?

      When looking at a home equity loan vs line of credit the main differences are:

      • A home equity loan has a fixed-rate. A line of credit has a variable interest rate that adjusts with the Prime Rate. The Prime Rate is The Wall Street Journal Prime Rate published on the last business day of the month.
      • With a home equity loan, you make fixed payments of principal and interest. With a home equity line of credit, you only need to make interest payments during the draw period. The set period of time (typically 10 years) during which you can borrow (or "draw") against your line of credit.
      • With a home equity loan, you get the entire loan amount in one lump sum. By contrast, a line of credit is available for a long-term draw period, which you can access with home equity line of credit checks or through online banking. If you pay down principal during your draw period, you can borrow that principal again if you want to.

      Learn more about home equity loans or lines of credit

    • What is the difference between a fixed-rate and an adjustable-rate?

      Understanding rates is important when you’re trying to understand what a home equity loan is and how it is different from a line of credit. Fixed-rate loans (a home equity loan) have interest rates that don't change during the life of the loan. Adjustable-rate loans (a home equity line) have rates that are linked to an index, such as Prime or LIBOR, Stands for the London Interbank Offered Rate. The British Bankers Association uses information gathered from a survey of multiple lending institutions to determine LIBOR rates. and therefore can change over time.

    • What if I want to make interest-only payments?

      With a home equity line of credit (HELOC) you are only required to pay interest on the outstanding principal balance during the draw period. The set period of time (typically 10 years) during which you can borrow (or "draw") against your line of credit. You can make principal payments during the draw period, but they aren’t required. If you do repay principal during the draw period, those funds can be borrowed again. Home equity loans on the other hand require a fixed monthly payment of both principal and interest.

    • Can I get pre-approved for a home equity loan or line?

      Just like with points, pre-approvals are typically only available for mortgages and not for home equity loans or lines of credit.

    • Do I need to get a home appraisal?

      We almost always require an appraisal to qualify for a home equity loan or line of credit. After we review your application and collateral information, we will determine the type of appraisal needed and talk to you about how it will get done.

    • How fast will I get my money?

      That depends mostly on you. Be sure to promptly respond to any requests we make for additional documents needed to complete your application. Typically it takes about 45 days from application to funding, but can vary depending on your individual situation.

    • What are points?

      Points are a one-time fee that you can pay to lower your loan’s interest rate. One point equals one percent of your loan amount. Points are typically available for mortgage loans and not home equity loans or lines of credit.

    • What is the difference between interest rate and APR?

      The interest rate is the cost to actually borrow the money disbursed in the loan. The APR (annual percentage rate) adds in some of the upfront costs of getting the loan in addition to the interest, including any lender fees.

    • Are there closing costs with home equity loans and lines of credit?

      Typically our home equity loans and lines of credit do not have any closing costs*. A trust review fee ranging from $75 to $100, as well as recording fees ranging from $10 to $175, may apply for properties held in trust.

    • What amounts are included in my monthly payments?

      Home equity lines of credit require interest-only payments during the initial draw period. After the draw period both principal and interest payments are required on the outstanding balance. Home equity loans are paid in full over the life of the loan, in equal monthly payments that contain both principal and interest. For both home equity products, you can always make additional payments toward principal. For both home equity products, you can always make additional payments toward principal. Use our calculator to help estimate your monthly payment.

    • Will I need to pay private mortgage insurance (PMI)?

      PMI is not required for a home equity loan or home equity line of credit.

    • How do I figure out how much equity I have?

      Determining equity is simple. Take your home's value, and then subtract all amounts that are owed on that property. The difference is the amount of equity you have.

      To determine your home’s value, use your best guess or find a home value estimator. We can also help you determine your home’s current worth.

      Ex: If you have a property worth $200,000, and the total mortgage balances owed on the property are $120,000, then you have a total of $80,000 in equity.

    • What Is LTV and why is it important?

      LTV stands for loan-to-value. It is the total amount of liens on the property divided by its fair market value.

      LTV is used to determine how much you are eligible to borrow and is one of the factors used in determining your interest rate. A lender typically allows you to borrow up to 80% LTV. The lender will multiply the lower of the purchase price or the estimated market value by 80%, then subtract the outstanding liens on the property. The remaining balance represents your available equity. Keep in mind that LTV requirements may vary by state and lender.

      Ex: Using the example from the FAQ above, if a lender typically allows you to borrow up to 80% LTV, then you would be eligible to borrow $40,000 in equity.

    • What are the benefits of using home equity?

      Using the equity in your home is a great way to improve your property, consolidate high-interest debt, finance important life events, or even cover unexpected emergencies. The interest rate you get is often lower than with unsecured loans. (Refer to other home equity loan FAQs and resources for additional information)

      And interest you pay is often tax deductible. (Consult a tax advisor for more information.)

    • How do I find out my home’s value?

      When you first apply for a home equity loan, just take your best guess as to your home's value. If you want to try to be more specific, you can use a home value estimator or talk to a Home Loan Originator for other methods of trying to determine this amount. However, we will determine the value during your application process. See what is my house worth? for more information.

    • Is the interest I pay tax deductible?

      Interest you pay on a loan that is secured by your primary residence may be tax deductible. Consult with a tax advisor to determine whether the interest you pay is eligible.

    • How do you decide if I qualify for a loan (or line)?

      When reviewing your application information, an underwriter examines three main factors to assess whether you qualify for the loan and is also used to determine your interest rate:

      1. Your credit history (FICO score)
      2. Your loan-to-value ratio
      3. Your debt-to-income ratio
    • What will my rate be?

      There's no way to say what your exact interest rate will be on your home equity loan or line of credit until your application is completed, but our calculator can help you estimate based on preliminary factors. Your final interest rate is based on factors such as your credit history (FICO score) and ability to repay, the value of your home and the loan or line amount, to name a few.

    • How much money can I borrow?

      The two biggest factors when borrowing a home equity loan or line of credit are the amount of equity you have in your home and your credit score. Another factor is your debt-to-income ratio (how many bills and obligations you have compared to your income). To calculate your debt-to-income ratio, write down all of your monthly debts (don't worry about utilities or your television service), then divide that amount by your monthly gross income. This will give you a general estimate of your debt-to-income ratio.

    • Do I need to have perfect credit?

      If your credit score is high you may receive better rates and have more options available to you taking out a home equity loan or line of credit. But simply having some credit issues in the past won’t necessarily disqualify you from getting a loan or a line. However, your credit history needs to demonstrate both willingness and ability to repay on time.

 

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Buy or Refinance:

Get started online
or call 1-888-514-2300
MON-THURS: 8 AM - 8 PM
FRI: 8 AM - 6 PM
SAT: 9 AM - 3 PM

Mortgage Servicing:
1-800-234-6002


Home Equity:

Apply for a home equity line of credit
Need help? We'll contact you
or call 1-888-333-1206
MON-THURS: 8 AM - 8 PM
FRI: 8 AM - 6 PM
SAT: 9 AM - 3 PM

 

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