How To Use a HELOC as an Emergency Fund

How to use a HELOC as an emergency fund

It’s recommended that everyone have three to six months of living expenses saved in an emergency fund. In an unpredictable year like 2020, emergency funds are as important as ever.  

If you are unable to save for emergency expenses, consider applying for a Home Equity Line of Credit (HELOC). A HELOC is a low-cost alternative to high-interest consumer loans and credit cards. If you are looking for a steady stream of accessible funds for emergencies, HELOC's can be a great solution. 

To determine your HELOC rates and terms, a lender will assess the amount of equity in your home, as well as your financial circumstances and credit score. Depending on those factors, the lender will then determine your HELOC’s terms. 

To extract the money from your HELOC, you will receive a card to make purchases. And like credit cards, you will be expected to pay at least the minimum payment that is calculated based on your balance and interest rate. 

The Southland HELOC offers a variety of convenient features. Qualified borrowers may borrow up to 90% of an owner-occupied home’s appraised value, less any balance on your first mortgage, at as low as 2.99% APR for the first 12 months.*  

Borrowers may also make interest-only minimum payments during the 10-year draw period. The interest on your loan may be tax deductible.*

Of course, just like any loan, you must responsibly make payments on time to prevent your HELOC from completely depleting your equity, putting you at risk for foreclosure. 

For more information on Southland HELOC's, click here

*APR=Annual Percentage Rate. Introductory rate (Intro Rate) is available to eligible members with a minimum FICO of 660 and requires a minimum balance of $10,000. Intro rate is available on one property and does not apply to subsequent credit limit increases, refinances, and previous or existing Southland HELOCs. Not all members will qualify. 2.99% intro rate is good for the first 12 months of the loan and adjusts to the then fully indexed variable rate at the beginning of the thirteenth month. Current HELOC Rate is based on Prime Rate  + the margin (0.25 % for up to 70% LTV, 0.50% for 70.1-80% LTV, and 1.00% for 80.1-90% LTV). LTV=Loan to Value, a ratio used to determine the equity available on your home. Other rates may apply based on credit.  Annual cap of 5% over fully indexed rate.  The rate cannot drop below 4% or exceed 15%.  The rate shown assumes that you have a FICO of 700 or above. Investment properties do not qualify for intro rate. Investment HELOC Rate is based on the Prime Rate  + the margin (1.50% for up to 70% LTV. Other rates may apply based on credit profile. Prime is based on the Wall Street Journal Prime Rate + margin based on credit score. All HELOCs are variable rate loans. Rates can change monthly on the first of the month. Rate cannot change by more than 5% in any one year. 10-year interest only terms followed by a 15-year amortized payback period. Closing costs for the HELOC are currently waived (subject to change). $50 annual fee is waived on HELOCs with a minimum outstanding of $10,000 for 30 days during the year. Credit limit determined by the equity in the real property, which is used as security for the loan. Maximum loan amount is $500,000 for up to 80% LTV, and $250,000 for up to 90% LTV.  Maximum loan amount is subject to credit qualification and appraised property value. Membership is subject to eligibility. Real Estate Loans are subject to credit approval. Property you own which generates income is not eligible.  All new accounts will be verified through ChexSystems and are subject to credit approval and verification of equity. Rates and terms are subject to change without notice. Early closure cost reimbursement may apply— If the HELOC is paid off and closed during the first 3 years of the loan, you will be charged a $500 early termination fee to reimburse Southland Credit Union all third party fees incurred at closing. Mortgage interest tax may be subject to income restrictions. Consult a licensed tax advisor regarding your ability to take this deduction. NMLS #685526.