About Home Equity
What’s home equity?
Home equity is the difference between how much you owe on your mortgage and how much your home is worth. You can build equity as you pay down your loan balance and as the market value of your home increases. Navy Federal has home equity loan options that allow you to use your home’s equity to help you pay for life’s big expenses.
How do I build home equity?
In an ideal situation, the equity in your home will go up every year as home values rise and your loan principal decreases with your monthly payments.
Here is an example of how you gain equity in a home:
- You make a $20,000 down payment and take out a $180,000 mortgage to purchase a home that has a sale price of $200,000.
- In five years, you pay $13,000 toward the mortgage. You now owe $167,000 on the loan.
- During this same time, your home value has increased to $230,000.
- To calculate your home’s equity, subtract your current loan principal of $167,000 from the home’s current value of $230,000.
- You have $63,000 in home equity.
How do I determine my home’s market value?
If you don’t have a recent appraisal, you can estimate your home’s market value by researching recent sale prices of similar homes in your neighborhood. A local real estate agent can assist you with this process. You can also get a general idea of your home’s value by reviewing your tax statements for the assessed value of your home. A current home valuation, including clear pictures of the outside of your home, is required to determine how much equity you can borrow. When you apply for an equity loan/line of credit, your Processor will determine the type of home valuation or appraisal needed based on the details of your loan and can schedule it for you.
What’s the difference between a Fixed-Rate Equity Loan and a Home Equity Line of Credit (HELOC)?
With a Fixed-Rate Equity Loan, you receive the money you’re borrowing in a single payment, and the interest rate stays the same for the life of the loan. With a Home Equity Line of Credit, you have the ability to borrow money whenever you need it up to your maximum credit limit. Unlike Fixed-Rate Equity Loans, HELOCs have variable interest rates.
Are there potential tax benefits with a home equity loan or line of credit?
Yes. Unlike other types of consumer loans, the interest paid on a home equity loan or line of credit may be tax deductible. Consult with your tax advisor for more information.
What repayment terms are available on a Fixed-Rate Equity Loan?
Navy Federal offers Fixed-Rate Equity Loans with 5-, 10-, 15- and 20-year repayment terms.
How does a HELOC work?
A HELOC is a line of credit secured by your home. As with a credit card, you can borrow as needed up to an approved credit limit. A HELOC’s term includes a draw period, followed by a repayment period. At Navy Federal, you can draw (or borrow) money for 20 years. You’ll pay interest only when you use your line of credit. Any remaining balance will be paid in full during the 20-year repayment period.
How often can the Annual Percentage Rate (APR) change on a HELOC?
The APR on a HELOC can change monthly. It’s a variable rate that may increase or decrease based on changes in the prime rate. The prime rate is updated according to the published rate in the Wall Street Journal on the first work day of every month. At Navy Federal, the minimum APR (or Lifetime Floor rate) for HELOCs is 3.99%. The maximum APR is 18%.
Can I make additional principal payments on a HELOC?
Yes. You can make additional principal payments once your current monthly payment has been satisfied. You can make a manual payment (prior to your new statement release on approximately the fifth day of each month) online, by calling us at 1-888-842-6328 or by visiting a branch. You can also request automatic payments to include principal from your Navy Federal checking or savings account.
Can I convert my HELOC to a Fixed-Rate Equity Loan?
If your Navy Federal HELOC is older than six months, it can be converted to a Fixed-Rate Equity Loan in accordance with the terms of your loan. Please refer to your loan closing package for additional conditions. Conversion will prevent you from making any additional draws. If you have questions about converting a HELOC, call us at 1-888-842-6328.
The Home Equity Loan Process
What information will I need to apply for a home equity loan or line of credit?
Our How to Apply page outlines the necessary information needed to apply. Review this page before submitting your application. Once your application is received, have these documents on hand in case your Processor requests them:
- two most recent paystubs
- retirement statements (e.g., Social Security Awards letter)
- proof of homeowners insurance
- trust documents (if applicable)
Additional documentation may be required if you’re self-employed.
How long does it take to get a home equity loan/line of credit?
It typically takes 30-45 days to close on a new equity loan or line of credit once we receive your application. If an appraisal or additional documentation is needed, processing times may vary. Visit our How to Apply page for a step-by-step guide to help you close on your home equity loan.
How soon will I get my money once the home equity loan or line of credit closes?
If the property used to secure your equity loan or line of credit is your primary residence, there’s a three-business-day waiting period after closing (you can change your mind and cancel your loan during this time). Your funds or line of credit will be available after the three-day period ends. The three-day waiting period doesn’t apply for investment properties and second homes.
Do I have to pay closing costs on a home equity loan or line of credit?
Yes, you’re responsible for closing cost fees paid to third parties for services performed during the loan process. Navy Federal doesn’t add any additional fees or receive any payments from these service providers. For loan or line of credit amounts of up to $250,000, these third-party fees typically range between $150 and $1,200 ($250 and $1,900 in NY, ID, and TX). Closing costs depend on the location of the property, property type and equity loan or line of credit amount.
Typical closing costs you’ll need to cover include:
- credit report fee
- flood determination fee
- government fees and recording charges
- taxes (e.g., transfer taxes)
- property valuation
- title search/insurance (if required)
- fees associated with condominium properties (if required)
Occasionally, there may be exceptions or unique situations when you’re charged other closing fees. Consult with your Processor for the fees you’ll need to pay.
Can I roll my closing costs into my loan?
Yes, but some closing cost fees must be paid during the application process. These include the credit report fee, appraisal (if required), and some fees associated with condominium properties (if required). Navy Federal will automatically roll all remaining closing costs into your new equity loan. There are no out-of-pocket expenses required on your loan closing date. For Fixed-Rate Equity Loans, closing costs will be deducted from your loan proceeds. For Home Equity Lines of Credit, a beginning balance equal to your closing costs will be added to your credit line.
I recently applied for a home equity loan/line of credit. How do I access my loan documents online?
If you opted to receive your loan documents electronically at the time of application, you can access them safely and securely from any computer with internet access. The documents will be available within 3 business days of submitting your application. Each applicant must review and sign the documents.
If you are enrolled in Navy Federal’s Online Banking, log in to your Navy Federal online account. In the “Loans & Credit” section on the “Account Summary” page, click on “Review and Sign Documents” for your equity application.
If you are not enrolled in Navy Federal’s Online Banking, check your email for instructions from Navy Federal. If you do not receive an email within 3 business days of submitting your application, check your spam/junk folder or call your Processor. If you have questions, call the Equity Loan Department at 1-877-573-2324 and press 2, weekdays from 8:00 am to 6:00 pm, Eastern Time. For assistance outside normal business hours, call 1-888-842-6328.
Using Your Home Equity
What can I use a home equity loan or line of credit for? Are there any restrictions?
You can use a home equity loan or line of credit for almost any purpose. Common uses include:
- home improvements and repairs
- unexpected expenses or emergencies
- education expenses
- medical bills
- consolidating debt
Navy Federal doesn’t offer home equity loans or lines of credit for properties held in a life estate. For business loans, please visit Navy Federal Business Services. Please call 1-888-842-6328 if you have questions.
How do I order HELOC checks? Are there any restrictions on their use?
If requested, we'll provide you with checks at loan closing. If you need to order more, call us at 1-888-842-6328. We’ll gladly issue additional checks as long as your HELOC is in good standing and within the draw period. HELOC checks can be used anywhere personal checks are accepted. They cannot be used for online purchases or with billers/retailers who exclusively use electronic check conversion. You can also request a Home Equity Line Platinum Credit Card, which is tied to your line of credit. The card can be used wherever Visa® is accepted, all with no annual fee. To request a card, call us at 1-888-842-6328 or visit a branch.
Can I increase the credit limit on my HELOC?
No. The credit limit on a HELOC cannot be increased because equity loans are liens that are recorded at the county in which the property is located. A new HELOC application would be required. To apply, submit your application online, call us at 1-888-842-6328 or visit a branch.