Home Equity Line of Credit (HELOC): A Guide for Michigan Homeowners

A UMCU home equity line of credit (HELOC) enables a homeowner to borrow money from the equity existing in their home. When you apply for a HELOC at UMCU, we look at the current market value of the home compared to any outstanding balance on the mortgage. As a Michigan homeowner you can apply with no application fee, no annual fee, and no closing costs. In addition, other factors such as income and credit score are reviewed before determining how much a borrower would qualify for.

What are the Benefits of a HELOC?

Flexible access to Funds When You Need Them

Once you’re approved for a HELOC at UMCU, you can freely borrow as much or as little as you want based on your loan limit for the entire ten-year draw period. For other lenders, the draw period could vary and usually range between five and ten years. Few financing options provide that kind of flexibility.

couple in kitchen reviewing their home equity options and smilingInterest-only Payments During the Draw Period

During that initial draw period, you only have to pay interest on the amount you have actually borrowed (but you always have the option to pay more). Considering the competitive interest rates which HELOCs offer, this typically translates into very manageable monthly payments. It’s only when you move into the repayment period in year 11 (or whenever the draw period for your individual HELOC ends) that you begin paying off the interest and the principal together.

Lower Interest Rates Than Credit Cards and Personal Loans

Because your home serves as collateral, HELOCs typically offer lower interest rates than personal loans and credit cards. This can make a HELOC a more cost‑effective way to borrow, especially for larger expenses or longer repayment timelines.

Use Your HELOC for Almost Any Purpose

A HELOC gives you the flexibility to use the funds for almost anything. That could mean a large improvement project, paying off other high-interest debt, or handling a sudden and unexpected expense. The fact that you can borrow a large amount whenever you want for any purpose means flexibility you won’t find elsewhere.  

What Should You Know Before Opening a HELOC?

Variable Rates can Affect Your Monthly Budget

While the interest rate you pay on a HELOC is tied to the Prime Rate, it’s normally not fixed the way most mortgage rates are. For that reason, the rate you pay can rise or fall over the lifetime of your HELOC, meaning your payments can fluctuate from month to month. As an alternative, UMCU does also offer a fixed-rate home equity loan, with consistent repayment amounts over a chosen term. Reach out to us for more information.

Your Home Secures the Loan

Because your home secures the loan, borrowers must fully understand the importance of prioritizing both mortgage and HELOC payments each month. If repayment become difficult, it could put your home at risk. That’s why it’s so important to always borrow within your means and ensure you have a clear and realistic budget.

Borrowing More than You Need

A HELOC can provide access to far more funds than most other types of loans. For some, this can create the risk of spending beyond the intended budget. Consider using a HELOC payoff calculator to estimate the monthly payments. 

Is a HELOC Right for You?

For homeowners with equity in their property, a HELOC can be a viable option to consider when needs arise. Your first mortgage is left untouched, and the HELOC application at UMCU comes with no fees or closing costs. Borrowers need to determine in advance what the intended use will be and also make sure that the payments will fit comfortably into the budget, both during the draw period and later during repayment. 

A home equity line of credit can be a helpful financial tool, but it’s not the right fit for every situation. Talk to a UMCU team member to learn more. Helping our members maintain financial wellness is at the heart of what we do.   

Connect with a Home Equity Specialist   

Mark Munzenberger is the Financial Education Manager at UMCU, where he leads financial wellness programs and resources for members across southeast Michigan.