If you're thinking of remodeling your home and looking for ways to pay for it rather than drawing from your savings, using your home's value might be a viable option for you.
The Michigan State University Federal Credit Union (MSUFCU) offers a loan that turns your home’s value into available credit that you can draw from in fixed-rate segments.
This loan product is called the SmartLine℠ home equity loan and can be used to pay for your upcoming home remodeling project.
As an MSUFCU preferred builder with 15+ years of remodeling experience, we have helped many homeowners like you partner with them to finance their dream home remodel.
In this article, you’ll learn what the SmartLine℠ home equity loan is, how the loan and repayment structure works, and how the loan amount is determined.
What is a SmartLine℠ home equity loan?
The SmartLine℠ Home Equity Loan acts like a mix of two different loans. It operates similarly to a traditional variable rate home equity line of credit (HELOC), but applies fixed interest rates only to the segments you borrow.
Essentially, the SmartLineSM loan is like a credit card tied to the equity in your home, which you can draw from as needed. You only pay interest on the amount you borrow to use for home remodeling projects or repairs.
To figure out what fixed rate you qualify for, MSUFCU checks your recent credit report or does a soft credit check.
With annual percentage rates (APR) as low as 7.5%, a SmartLine℠ home equity loan is one of the lowest-rate options for members, making it a cost effective one for your upcoming project.
This means you can borrow money when you need it, and that you have the option to lock in the amounts you borrow at a set rate. This way, you can better manage your spending and potentially save money.
This loan is available only to MSUFCU members. Fortunately, they make the enrollment process easy. Become a member online in as little as five minutes.
What are fixed rate segments from my home equity loan?
A fixed rate segment is an amount borrowed from your available credit that gets locked in at a fixed rate, with a set monthly payment for a specific period. The interest rate is fixed at the time the segment is withdrawn.
At any given time during the draw period, you can lock in up to three segments of your credit. The minimum amount for a fixed rate segment is $2,500 and segment repayment terms range from 12 to 180 months.
How do I pay back my home equity loan?
A SmartLine℠ home equity loan has a term length of 25 years. For the first 15 years, called the draw period, you can take out as much money as you need from your credit line.
While the total loan length is 25 years, segment repayment lengths range from 12 - 180 months. As a segment is paid down, it will replenish the line of credit availability.
The final 10 years of the loan term is called the payback period, during which you can't borrow any more money from the credit line.
The payback structure for the SmartLine℠ home equity loan consists of 120 equal monthly payments (10 years).
Let’s say you are approved for $100,000 in credit with a SmartLineSM loan. If you only borrow $35,000, you'll only pay interest on that $35,000. The other $65,000 will remain available for you to borrow until the payback period begins, however you won't have to pay interest on it unless you borrow it.
How is my loan amount determined?
The loan amount you qualify for is based on the value of your property, as assessed by a licensed appraiser. MSUFCU uses this valuation to determine the maximum amount they can lend you.
The amount of your loan cannot exceed the total appraised value of your property.
Eligible properties must be located within the state of Michigan and be one of the following types of properties:
- Primary residences
- Owner-occupied second homes
- Modular and manufactured homes
- One to four unit buildings, with owner occupancy in one of the units
Next steps to apply for an MSUFCU SmartLine℠ home equity loan
Rather than drawing from your bank account, using the value of your home can be a convenient option for financing your upcoming project.
Locking your interest rate on fixed rate segments allows you to access the funds you need to complete your remodel without having to pay interest on the unborrowed portion of your loan.
MSUFCU makes applying for the SmartLine℠ loan easy. You can apply on their website, by phone at 517-333-2424 option 3, or at your local branch location.
To learn about Custom Built’s design and remodeling services for your upcoming home remodeling project, reach out to one of our project development advisors. We’d love to discuss your project and see if we are the right fit for you.
To learn more about using the MSUFCU SmartLine℠ loan, read about its pros and cons to see if it’s the right fit for you and your project.
To read about another financing opportunity for your project, learn about the MSUFCU home improvement loan.
*The information provided in this article is for informational purposes only and should not be considered official financial advice. It's always best to consult with a financial advisor or professional before making any financial decisions.*