WECU Expert Insights at the Whatcom Home Show: HELOCs and Home Equity Tips

Transcript

Keith (00:00):

Hello and welcome to a special edition of the WECU Expert Insights. We’re here at the Whatcom Home Show, and today we’re diving into home equity, how you can tap into your home equity to make all of your dream home improvements happen. I’m joined today by Nick Borg, a manager in WECU’s Real Estate Department, as well as Michelle Clemens, loan officer in WECU’s Real Estate Department. So thanks both for joining me.

Michelle Clemens (00:22):

Thank you, Keith.

Keith (00:23):

So Nick, my first question is for you. A lot of homeowners are thinking about their homes and wanting to make sure that they fit for their families, but with the interest rate environment, a lot of ’em are talking about home equity as a solution for improving their homes. Can you talk about that?

Nick Borg (00:39):

Yeah, Keith, you’re absolutely right. So a lot of the trends we’re seeing right now are tied to the current interest rate environment. So 55% of homeowners have a mortgage rate of 4% or lower, and then 21% of homeowners have an interest rate of 3% or lower. So thinking of swapping a three or 4% for a rate between six or seven, which is where they’re hovering right now, could be a hard pill to swallow. Tapping into the homes equity is absolutely a big trend we’re seeing with HELOCs and second mortgages right now.

Keith (01:12):

Yeah, I know that’s that’s where I find myself and my wife. We’re looking at our house and we need to find a solution, but it’s hard to get rid of that really good interest rate you have. So figuring out how to improve it is definitely a way to go. So Michelle, I know that there are a lot of misconceptions when it comes to utilizing your home’s equity. Can you walk through some of those misconceptions?

Michelle Clemens (01:33):

Yes. Some misconceptions that I hear is that I cannot access my home’s equity, and you can, the equity is the difference between what your home’s value is compared to what you owe on it. And we are always happy to have conversations to run those numbers, to see what equity is available. Another misconception that I hear is that a home equity line of credit has to be used for home improvements, and while that’s a great purpose of the line of credit, I also see them used for debt consolidation, education expenses or purchase a vehicle. You can really use it for anything.

Keith (02:09):

Wow. Wow, that’s awesome. Now, I’d love to get more into some specifics on home equity options that we offer at WECU and how they work. Can you walk through the options and how does a homeowner decide which option makes the most sense for them?

Michelle Clemens (02:22):

Yes. So the home equity line of credit is a revolving line of credit that you draw from as you need it. So your payment is based on the amount that you have drawn, and that means that you can think about what projects or needs you have for it right now and what’s coming up down the line. And with that product, you can get it all set up for what needs you may have now or coming in the future, and then it can be all set up ready for you when you need it.

Keith (02:48):

So this is the HELOC that we hear about. That’s the heloc, yeah,

Michelle Clemens (02:50):

That’s the heloc. And then we also do have a home equity loan, which is a, you take all of the funds at one time, your payment is based on the whole dollar amount of the loan and you take it from there.

Keith (03:03):

Yeah. So what I’m hearing you say is the home equity line of credit, it’s open for a period of time, so it’s very flexible on what you use it

Michelle Clemens (03:11):

Yes.

Keith (03:11):

And you’re getting approved for a certain percent of your home equity. Okay. Why would this make sense for somebody? What’s the real driver of people getting this these days?

Michelle Clemens (03:22):

So it’s great to set up just in case you need it, if you think you might have some projects or needs for it coming up, but it’s not immediate. You can get it all set up and it will be there for you when you need it. So you don’t have to take all the funds right now.

Keith (03:37):

Yeah, it’s a nice backup option. I know that one thing that I’ve heard recently was that a lot of people use their credit card to say something goes awry and I need a backup source of funds and they use their credit card, but I’ve heard that some people might use a HELOC in that way.

Michelle Clemens (03:52):

Yes, exactly right. It’s having peace of mind knowing that it’s set up in case you have an emergency, an unexpected home improvement, anything like that.

Keith (04:01):

And

Michelle Clemens (04:01):

It’s very easy to access. So you’ll be all set to go.

Keith (04:05):

So a question I had is I love the idea of having maybe something as a backup option that’s a typically a lower interest rate than a credit card if you don’t really have an immediate use for a HELOC. Is there any downside to having it open right now?

Michelle Clemens (04:18):

There’s no downside to getting it open. There isn’t. You can get it set up. There’s no annual fee. WECU is paying for the typical cost for the line of credit. So if you open it and don’t use it, there’s nothing that you pay at this time.

Keith (04:32):

So I’ve also heard that with our HELOC product specifically, that even though it’s typically a variable interest rate, that you’re actually able to lock it in, how does that work?

Michelle Clemens (04:41):

Yes. So it is possible to lock in a chunk of money into a fixed rate, a minimum of $5,000, but you can lock it in at when you see a rate that you’re comfortable with. You can lock it in at a term that you choose.

Keith (04:55):

Okay, awesome. So maybe right now it wouldn’t make sense people to be locking that in as far as interest rates being a bit higher, but if they do drop in the future, maybe you say, oh, this is an interest rate for this that I like. Okay. One more question I think that people don’t really understand is that this is not like a, it’s open, right? But there is kind of a period of time that’s associated with it. Can you talk about that period of time and how that works?

Michelle Clemens (05:22):

Once you have the line of credit open, it has a 10 year drop period, so that means you have 10 years to access the funds, and then when you hit the 10 year marker, it’s a 20 year amortization loan.

Keith (05:33):

So one final question I have about HELOCs. I know that we mentioned at the top that a lot of people they have their really good interest rate mortgage and they don’t want to get rid of that. If you were to use a home equity loan or heloc, are you getting rid of your mortgage interest rate or how does that

Michelle Clemens (05:47):

Work? Yes, some people do ask that question. So if you are thinking about setting up a line of credit, know that it does not affect the current mortgage that you have. It is a second, so it does not affect any mortgage that you may have right now on the property.

Keith (06:01):

Awesome. Thank you so much, Michelle. Okay, Nick, I want to ask you a question. We are highlighting a couple different things, home equity, but also we have the Lux Visa that we’re talking to a lot of people here at the Home Show about. Can you talk about why that might make sense for home improvements?

Nick Borg (06:15):

Sure. Yeah. The Lux Visa is one of our most popular credit cards. And so what makes it relevant to say home improvements? We offer 3% cash back on home improvement purchases. It’s also an introductory interest rate and some other great features, but the 3% cash back for home improvement purchases is a great feature highlighted here for things at the Home and Garden show.

Keith (06:38):

Awesome. Well, thank you both so much for the insights today. If you are thinking about improving your home and you’re wondering about your options for financing those improvements, come and check us out. Go to wecu.com or speak to somebody on our team. Alright, now we’re going to move on to a segment where we’re going to check out some of the home show vendors here and we’re going to see what they have to offer. So we are here at the Barron Booth. I’m here with Heather. Heather, your booth looks awesome. What do you guys have going on the home show today?

Heather (07:07):

So we’re really working on efficiency and so we’re working on solar. So if you want to run your heat pump when the electricity’s out and we are giving away electric vehicle too.

Keith (07:17):

I know that Barron, you guys have a lot of different business lines. If you go to Barron, you’re saying I can get my solar, I can get my, can you talk about your different business lines?

Heather (07:25):

Yeah. We do plumbing, we do electrical, we have solar, we do fireplaces, we do duct cleaning, we do furnaces, heat pumps, anything for the whole home.

Keith (07:35):

Awesome, awesome. Well, another great brand, a local brand, and lots of great solutions. Thanks for showing us around.

Heather (07:41):

Thank you so much.

Keith (07:45):

Alright, now I’m here with Ken from TD Wood Recovery. We are outdoors here on the rainy portion of the home show, but Ken, you have a lot of some beautiful things going on here. Can you tell me about it?

Ken (07:55):

Yeah, we go up in the mountains and salvage old growth cedar from remnants of what was fell a hundred years ago. We fly it out with a helicopter and we salvage shake shingle blocks and lumber slabs and all these products are made with the fall down off of our lumber business. All the boards that are under eight foot long, we save all the scraps and we make projects with them.

Keith (08:24):

Wow, wow. It’s really beautiful. The colors really pop on all this stuff and it’s really interesting. You have different types of chairs and tables. You guys get very creative it looks like.

Ken (08:34):

Yeah, well we just started this part of the business, so we’re trying to have a variety of stuff to sell and see what sells and what doesn’t sell.

Keith (08:41):

Yeah. Well, super interesting. I appreciate you showing us around. Oh, thank you. We are here at Lyden Tech with Brian. Brian. We are inside of your, what do you call this?

Brian (08:54):

We call it our demo trailer.

Keith (08:56):

Demo trailer. Okay. And what are you demoing? What are you kind of showing here? Just home show this weekend?

Brian (09:00):

Yeah. Well, we couldn’t pick up an entire house and bring it here. And normally we work in people’s homes. So instead we built out an experience of what we do in people’s homes. So we put a whole home automation system in here. There’s a whole home theater in here. We automate the lighting, the shades, and actually we decked this whole thing out with invisible speakers by stealth acoustics.

Keith (09:23):

Okay. Wow. Yeah, I know. I was in here earlier waiting to film with you guys and it sounded amazing in here. Pretty awesome acoustics.

Brian (09:30):

Yeah, absolutely. And the great thing is once we put up all the shades and the lights, the projector screen, it just looks like a regular living room. Awesome.

Keith (09:37):

Awesome. Well, thanks so much for showing us what you got going on. Yeah, absolutely. Well, those are just a few of the fantastic home improvement solutions here at the show. And with WECU’s Home Equity Solutions, as well as our Lux Visa, your home improvement projects just got a lot easier. Thanks for watching the special edition of the WECU Expert Insights.