It’s Your Money Q&A
Becky Soetaert, Retail Lending Product Manager
Q: My husband and I want to update our home with a number of improvements and we plan to use the equity in our home to secure the loan. What makes more sense, a home equity loan or line of credit?
A. That’s an important question to ask, and the answer may depend on whether you plan to get all of the work done at once or roughly the same time, or if the projects will be spread out and paid for over a longer period of time.
With a Commerce Home Equity Loan, you get the full amount you need at once. It’s a single, lump-sum loan disbursement that is ideal for one major project, such as a kitchen remodel, or several improvement projects that are packaged into a single contractor’s bid.
The loan offers a fixed rate for the entire term, up to 12 years. This gives you a fixed monthly payment, so the predictability can make budgeting easier. If you’re a CommerceOptionsSM customer, you may enjoy up to a 0.75 percent discount.* If you are not a CommerceOptions customer, you can still earn a 0.25 percent discount by having payments automatically deducted from your Commerce checking account.
A Commerce Home Equity Line of Credit offers a five-year term and provides ongoing access to a reusable source of funds. Many homeowners prefer the convenience of a "HELOC" for do-it-yourself projects, work performed by multiple contractors, or simply to spread out the jobs over time. You can access your funds by writing checks, transferring funds through Online Banking, calling or stopping by a branch.
With the HELOC, interest rates are variable. Payments are flexible — depending upon the amount of equity you have in your home, you can make interest-only payments or payments of principal and interest each month, but you can always elect to repay as much as you want above those minimums.
In either case, borrowing against the equity in your home can be a smart decision, one that allows you to enhance the value of your nest without dipping into your nest egg. You can borrow up to 85 percent of the equity in your home. Plus, there are nice potential tax benefits. And at Commerce Bank, there are no application fees, no bank fees at closing and no early payoff fees.
Consult your tax advisor as to the tax deductibility of interest paid on either type of loan. When you´re ready to put the projects in motion, call or stop by your nearest Commerce branch for a fast and free application process.
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*Up to 0.50% discount for those who choose automatic payment from their CommerceOptionsSM checking account, plus an additional 0.25% discount if refinancing from another lender. Mortgages and dealer loans are not eligible to receive the personal loan discounts. Additional refinancing option is limited to one discount per new installment loan, and is not applicable to Commerce credit card or loan account payoffs. Subject to credit approval. CommerceOptions requires significant product relationships or a $12 or $20 monthly fee.
