Equity Select Questions:
What makes EquitySelect different from traditional loans?
EquitySelect is a first-position home equity line of credit (HELOC). The loan offers payment flexibility in the sense that an applicant chooses the percentage of the annual loan balance they will pay each month at the start of the loan (1-5%). That percentage is then locked in for the term as the minimum amount due each month until the end of the term when a balloon payment will be due for the balance. Paying the minimum may not cover all interest due. If the monthly payment does not cover the monthly interest due, any deficiency will be added to the loan balance which will result in a balloon payment when the loan term ends or when paid off, if earlier.
What are my payment options with EquitySelect?
You can choose to pay as little as 1% of the annual loan balance, make interest-only payments, or pay more depending on your budget. This flexibility can help reduce monthly pressure and give you more freedom in how you manage your finances. Please note that this is a 40 year loan term, and there is a balloon payment due at the end.
Are these numbers really possible?
Yes, the payment structures offered by EquitySelect are designed with flexibility in mind. Loans are available from $75,000 up to $3 million for those that qualify. Contact one of our licensed loan officers to review your situation, explore your options, and find out if you qualify.
What does it mean that the payment is “capped”?
EquitySelect features a capped monthly payment that remains fixed for the full 40-year term of the loan. This provides predictable monthly payments, giving homeowners greater stability and long-term planning confidence. Please note that this is a 40 year loan term, and there is a balloon payment due at the end.
What is SOFR and how does it affect my loan?
SOFR, or the Secured Overnight Financing Rate, is a benchmark used to determine your loan’s variable interest rate. While SOFR can change over time, your monthly payment will stay within the capped limit established at the time of the loan. Please note that this is a 40 year loan term, and there is a balloon payment due at the end.
Is EquitySelect a non-recourse loan?
Yes. This means that if the home is sold and the balance is more than the home is worth, neither you nor your heirs will be responsible for the difference, provided loan terms were followed.
What is a balloon payment?
If you choose to pay less than the full interest due each month, the unpaid amount adds to your loan balance. This may result in a large amount being due at the end of the loan, known as a balloon payment. Your loan officer will walk you through how this works.
What happens if I can’t make my payments?
As with any mortgage, you are responsible for making required payments and staying current on property taxes and insurance. Failure to meet these obligations could result in foreclosure.
What is a first-position HELOC?
A first-position HELOC replaces your existing mortgage and gives you access to your home’s value. It offers a revolving line of credit with more flexible payment terms than many traditional loans.
What happens after the 7-year draw period ends?
EquitySelect includes a 7-year initial draw period during which you can access funds as needed. After the initial 7-year draw period ends, no additional withdrawals can be made, and the repayment period continues based on the agreed terms.
Servicing Questions:
What makes EquitySelect different from a traditional HELOC?
The Equity Select HELOC gives you the ability to pick a life of loan Minimum Monthly Payment percentage that suits your cash flow needs. You may pay the full amount, or any amount you wish provided it is equal to or greater than the Minimum Monthly Payment for that month. Unpaid interest is added to your loan balance.
Why is my Line of Credit separated from the Balance Outstanding?
Your Equity Select HELOC has a Line of Credit (LOC) for Draws and amounts you may currently owe us (e.g. a late fee or monthly payment). Unpaid accrued interest is not deducted from the LOC but is added to the amount outstanding. Payments, which always reduce the balance outstanding, must first fully pay off the unpaid interest or other charges before being applied to increase the available LOC.
How is my monthly payment calculated?
We take your month end balance outstanding (includes beginning balance, additional draws, payments, other adjustments, and accrued interest for that month) and multiply it by one-twelfth (1/12) of your selected Minimum Monthly Payment percentage.
Can I change my Minimum Monthly Payment percentage after closing?
No. You may not change your selected Minimum Monthly Payment percentage. This is fixed for the duration of the loan.
What happens if interest rates change?
The interest rate on your account is based on a margin plus an index of the 30-day Average SOFR and it may change monthly on the 1st of the month. The Index is currently published by the Federal Reserve Bank of New York and accessible at https://www.newyorkfed.org/markets/reference-rates/sofr-averages-and-index. We calculate your interest daily based on your activity and add that total amount to your balance at the end of every month.
What are the minimum and maximum interest rates?
The maximum rate of interest you can be charged is 15%. The minimum rate of interest is the margin on your loan.
Can I take additional draws from my line of credit at any time?
You may request draws at any time, provided you have availability in your LOC and are within the Draw Period of seven (7) years. Expedited draws (requested within 24 hours) will result in wire or express delivery fees. Unexpedited draws will be sent by ACH within 3-4 days.
Can I make additional payments or pay off my balance early?
Yes. You may. There are no prepayment penalties.
Will I receive a monthly statement?
Yes. You will receive a detailed monthly statement, with a new Minimum Monthly Payment.
What if I miss a payment?
Your payment is due on the 20th of each month. If you miss a payment, beyond the 10 days grace period after the 20th, you will be charged a 5% late fee (of that monthly $ payment, excluding escrow payments.) If you are an additional 30 days late your account will be reviewed and may be suspended, with no further access to your LOC until payment is resolved. Further delays in payment (i.e. total late payment reaches 90 days or more) will result in your LOC being automatically suspended.
