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T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I IThe Complete Guide toGetting and Usinga Home Equity Line of Creditin Hawaii1
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I ITA B L E O FCONTENTSPREFACECHAPTER 1Introduction to HELOCs6 What Is a HELOC How You Can Use a HELOC Who Is a HELOC Right For679CHAPTER 2How HELOCs Work10 10111213Monthly PaymentsDraw and Repayment PeriodsInterest RatesFixed-Rate Conversion OptionCHAPTER 3Planning for Your HELOC14 14151618181920Understanding Your Credit ScoreUnderstanding Your Debt-to-Income RatioUnderstanding Your Home’s ValueChoosing a HELOC That’s Right For YouPlanning for Rate IncreasesPlanning for RepaymentEnd-of-Draw OptionsCHAPTER 4How to Apply for a HELOC22 2223242526How to Get StartedDocumentationDisclosuresClosing CostsFees2
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I IHELO CHomeEquityLineOfCreditOwning a home in Hawaii is a major life accomplishment.Not only does it give you a secure place to live and builda family, it can be an effective way to build wealth andimprove your personal finances.For example, once you’ve built up some equity in yourhome, you can apply for something called a home equityline of credit (HELOC). This line of credit leveragesyour home’s equity to give you access to funds with anaffordable rate and flexible terms. Whether your goalsinclude consolidating debt, making home renovations,financing education expenses or paying for a major lifeevent such as a wedding, a HELOC could be the solution.3
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I IGiven the advantages, and the current lowinterest rates, it’s no wonder that an increasingnumber of homeowners are taking out HELOCs.Property research company ATTOM DataSolutions reported that almost 350,000 HELOCswere originated for U.S. residential properties injust one quarter in 2018, up 14 percent comparedwith the prior year.4
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I IThe median price of a singlefamily home on Oahu hasrisen by 140,000 in the pastfive years, meaning you mayhave a lot more equity inyour home than you think.To get a HELOC, you’ll need a good credit history and equity in your home.That equity may come from the mortgage payments you’ve made since buyingthe property or appreciation in your home’s market value. The median price of asingle-family home on Oahu has risen by 140,000 in the past five years, meaningyou may have a lot more equity in your home than you think.However, although HELOCs can offer substantial benefits, they also come withsome very specific requirements and restrictions, as well as the inherent riskinvolved with borrowing money. Before you apply for a HELOC, you should thinkabout how you want to use it, read the disclosures so you understand how it worksand make sure you’re comfortable with the risks. If you plan carefully and take theright steps, a HELOC could give you a big boost toward achieving your goals.We’re here to help! This resource guide will walk you through everything youneed to know about HELOCs, from understanding introductory rates to thedocuments you’ll need to apply.5
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I ICHAPTER 1Introduction to HELOCsWhat is a HELOC?A HELOC is a credit line that’s secured by your home. Itworks somewhat like a credit card, in the sense that youcan borrow various amounts at different times and, whenyou’ve hit your limit, you can repay those amounts andborrow again. Your limit is determined by your lender,based on your income, the amount of equity you have inyour home and your creditworthiness.You can generally borrow up to 85 percent of yourhome’s value, minus the amount you still owe onthe mortgage loan. For example, if your property isappraised at 400,000 and you owe 150,000, youwould calculate 85 percent of the total value, whichcomes to 340,000. Then subtract 150,000, givingyou a maximum line of credit of 190,000.Have Questions?Ready to Apply?Visit boh.com orcall 808-693-2222to get started.6
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I IC H A P T E R 1 I N T R O D U C T I O N TO H E LO C SHow You Can Use a HELOCSince a HELOC is secured by your home, it should be used for purposes that couldimprove your financial situation or quality of life, such as debt consolidation, homerenovations and education expenses.1DEBT CONSOLIDATION lets you combineyour credit card accounts, personal loans,car loans and other debt into one monthlypayment, often at a lower interest rate thanyou would have otherwise paid. Using aHELOC this way could potentially save youmoney and help you pay off your debt withone monthly payment instead of managingmultiple bills. Be careful not to take on newcredit card debt while doing this, as youcould end up with an even larger total debt.2HOME RENOVATIONS include repairs,like fixing an older roof or replacinga damaged sewer pipe, and majorimprovements, such as building anaddition, remodeling your floor plan,installing new windows, updatingyour kitchen or bathrooms or addinga backyard deck or a swimming pool.Repairs and improvements can boostthe value of your home by quite a bit,making a HELOC a sound investment.If you use your HELOC to repair orimprove your home, you may be ableto deduct the interest you pay on yourHELOC when you file your income taxreturns. Consult a tax advisor to findout the details.7
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I I3C H A P T E R 1 I N T R O D U C T I O N TO H E LO C S4If you’d like to REFINANCE YOUR MORTGAGE ,a HELOC can be a cost-effective way to notonly take advantage of low rates but also turnyour mortgage into a flexible line of credit. Eventhough you’re taking out a line of credit ratherthan another closed-end mortgage, you canbenefit from many of the same features as aconventional refinance would offer, including: Interest rates that are competitive withcurrent mortgage rates. Repayment terms that are more convenientfor your goals and budget—anywhere from3, 5 or 7 years up to 15, 20 or 30 years.When it comes to TUITION LOANS , there are afew instances in which a HELOC makes sense(if, for example, you’re able to pay off the loanwhile interest rates are still low), but in most casesthere will usually be other loan vehicles, includingfinancial aid and structured student loans, that makefor better options. Consider using a HELOC forother education expenses, such as books, schoolsupplies, student fees, travel to and from campusand so on. A HELOC may also be a good option tohelp finance the cost of private elementary and/orhigh school education. The ability to access cash by applying andqualifying for a HELOC larger than theremaining balance on your mortgageAnd, since it’s a line of credit, you can also takeadvantage of all the features that come withthis kind of financing. For example, as you startto pay down the balance of your HELOC, you’llgain access to that cash to use for whateveryou’d like, at a lower interest rate than you’dlikely be able to get with a credit card orunsecured personal loan. With this method,you also may be able to refinance with noapplication or appraisal fees, and virtually or noclosing costs (depending on your line amount,lien position, property type and propertylocation).A HELOC typically shouldn’t be used for dailyliving expenses, such as groceries or utility bills,luxury goods, family vacations, stock marketinvestments or risky business ventures. This isbecause a HELOC uses your house as collateral,unlike credit cards or other unsecured debt. Ifyou don’t repay the loan, the lender can takeyour house.8
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I IC H A P T E R 1 I N T R O D U C T I O N TO H E LO C SWho is a HELOC Right For?A HELOC might be what you’re looking for if thefollowing applies to you:You have a good credit history.You have equity in your home.You want to consolidateother debt, make homerenovations or you haveother financial needs.You want the flexibilityof a credit line.You should also have a good understanding of how aHELOC works.You’re comfortable withthe concept of a variableinterest rate, and are ableto handle potential higherpayments in the future.You understand that, if youdon’t repay your HELOC,your lender could forecloseand you could lose your home.9
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I ICHAPTER 2How HELOCs WorkTo get the most out of your HELOC, it’s important to understand how it works andwhat you can expect from it. Let’s run through the basics.Monthly PaymentsDepending on where you are in your HELOC’s term,your monthly payment may be composed of a mix ofinterest and principal, or only interest.PRINCIPAL is the amount of money you have borrowed.INTEREST is what the lender charges for lending youthe money. It is usually disclosed as a percentage rate(daily periodic rate and/or annual percentage rate) forwhat you borrow.Some HELOCs feature a final payment calleda BALLOON PAYMENT because it is usually muchlarger than a normal monthly payment. It can be tensof thousands of dollars, or more. This balloon paymentgenerally occurs because your HELOC’s amortizationperiod is longer than its term, so your monthlypayment doesn’t pay off your balance even duringyour repayment period. This structure gives you theflexibility of a smaller monthly payment, but can resultin payment shock when the balloon payment is due ifyou haven’t prepared for it.10
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I IC H A P T E R 2 H OW H E LO C S WO R KDraw and Repayment PeriodsA HELOC typically features a draw period and a repayment period. The duration of each periodvaries, depending on the term of your HELOC.DRAW PERIOD: During your draw period, you canREPAYMENT PERIOD: At the end of your draw period,borrow from your HELOC up to your credit limit. Eachtime you draw funds, you may be able to draw as muchor as little as you want or you may be required to drawat least a minimum amount. A minimum initial draw mayalso be required.your HELOC enters a repayment period, which maylast as long as 10 or 20 years.If you repay all or part of your principal during yourdraw period, your available credit will be replenishedand you can draw against it again if you choose to.This flexibility is a key feature of a HELOC.During the repayment period, you will no longer beable to withdraw funds and your required monthlypayment will increase (if you were making interestonly payments) to repay your balance. Depending onhow your monthly payments are structured, you mayalso have a balloon payment at the end in order tocompletely repay your balance.Draws usually can be made: Through online banking By phone With a HELOC transaction card With a line-of-credit check By transfer to a checking or savings accountDuring your draw period, your required monthlypayment will most likely be interest-only; however,you can also repay principal during this period if youchoose. Paying principal as well as interest during yourdraw period could help you avoid a large final payment,known as a balloon payment, when your HELOCends. It can also reduce monthly payments during therepayment period.11
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I IC H A P T E R 2 H OW H E LO C S WO R KInterest RatesMost HELOCs start with a low introductory rate forthe first 12, 24, 36 or 48 months. You may be offeredan introductory rate for one period or a choice ofintroductory rates with a corresponding time frame.The lowest rate will usually expire the soonest whilethe highest rate will likely last the longest.When your introductory rate ends, your HELOC ratewill increase to a fully indexed variable rate that’s basedon an index, such as the U.S. Prime Rate, plus a margin.The variable rate will fluctuate up and down as marketrates change. Whenever your rate changes, yourmonthly payment will also change.You may get an additional rate discount if you agreeto have your monthly HELOC payment withdrawnautomatically from your checking account. AnAUTOPAY RATE DISCOUNT is a great way to savemoney with your HELOC, and will help ensure thatyou’re making each payment on time.An autopay ratediscountis a great way tosave money withyour HELOC, andwill help ensure thatyou’re making eachpayment on time.12
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I IC H A P T E R 2 H OW H E LO C S WO R KFixed-Rate Loan OptionThere may be a periodic rate cap that limits theamount of percentage points that your rate canincrease during any given adjustment. You may alsohave a lifetime cap that defines the maximum interestrate that can be applied to your HELOC. You mayalso have a lifetime cap that defines the maximuminterest rate that can be applied to your HELOC, aswell as a minimum, or floor rate.Even after they convert to the variable rate, HELOCsgenerally feature lower rates than other types ofloans, such as credit cards. That’s because a HELOCis secured by your home as collateral, reducing therisk to the lender.The low introductory rates that come with HELOCscan be very enticing, but you should also considerthe fully indexed rate that will apply after theintroductory rate period ends. Closing costs, feesand balloon payments may also differ, sometimessubstantially, from one lender to another. It pays todo some comparison shopping before settling onyour lender.A HELOC fixed-rate loan option allows you to convertall or part of your credit line into a fixed-rate loan.Your monthly payment for this portion of your debtusually will be higher after you convert it becauseyour payment will be composed of both principal andinterest instead of only interest.A fixed-rate loan option may be helpful if you wantto lock in a fixed rate and payment for a portion ofyour HELOC. It could also help you shrink or avoida balloon payment at the end of your repaymentperiod.If you convert your entire HELOC to a fixed-rate loanoption, you may not be able to draw additional funds.If you convert only a portion of your HELOC, yoursubsequent draws on the remainder will still be atvariable rates.Your lender may limit how many fixed-rate loanoptions you can have at one time. The limit, if thereis one, is usually three to five.You may be charged a fee to convert all or partof your HELOC to a fixed-rate loan option.HELOCs generally featurelower rates than other typesof loans, such as credit cards.That’s because a HELOCis secured by your home ascollateral, reducing the riskto the lender.13
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I ICHAPTER 3Planning for Your HELOCTo qualify for a HELOC, you’ll have to meet the lender’s minimum requirements foryour credit score, debt-to-income ratio, home value and other factors. You’ll also wantto plan ahead through the lifespan of your potential HELOC, to make sure you’reprepared to use and repay it. Here are the basics you need to know when preparingto apply for a HELOC.Understanding YourCredit ScoreWhen you apply for a loan, your loan officertypically will pull your credit score to assess yourcreditworthiness. When it comes to applying for aHELOC, generally speaking, lenders require a scoreof at least 680 or higher, although this may vary fromlender to lender. If you’ve got excellent credit, say750 or higher, you may qualify for more attractiveHELOC interest rates, or possibly higher limits.If you have a low credit rating, click here for a guidethat explains the best ways to raise your DIT SCORE14
C H A P T E R 3 P L A N N I N G F O R YO U R H E LO CT H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I IYour Debt-to-IncomeRatio ExplainedYour debt-to-income ratio (DTI) compares your monthly income to your monthlydebt obligation, which includes payments for your mortgage, car loans, studentloans, credit cards, personal loans and any other debt you have. Your monthlyliving expenses, such as groceries, utility bills, gasoline, and cellphone andInternet services, are not usually included in your DTI.To calculate your DTI, add up your monthly debt payments and divide that totalinto your monthly pre-tax income. The result will be a percentage.Here’s an example:DTICALCULATIONMONTHLY DEBTPAYMENT 1,800MONTHLY SALARY 6,700 1,80027%Lenders use different standards to evaluate your DTI,but, generally speaking, if it’s higher than 43 percent,you may have to pay off some of your existing debtbefore you can qualify for a HELOC. Paying off debtwith the highest monthly payment first will improveyour DTI the fastest, since it’s your payment, notthe total amount of debt that you have, that countstoward your DTI.DEBT-TO-INCOMERATIO 6,70015
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I IC H A P T E R 3 P L A N N I N G F O R YO U R H E LO CUnderstanding YourHome’s ValueYour combined loan-to-value ratio (CLTV) comparesthe amount you owe for your mortgage and yourproposed HELOC credit line to your home’s value.Your home’s value is important because your homesecures your HELOC.When you apply for a HELOC, your CLTV generallycannot be more than 85 percent of your home’svalue. That means your mortgage balance, plus yourHELOC credit limit, cannot exceed 85 percent ofyour home’s value.To calculate how much you may be able to borrowwith a HELOC, take 85 percent of your home’s valueand subtract the amount you owe for your mortgage.For the purposes of calculating CLTV, your home’svalue isn’t the price you paid for it. Some lenders willuse the “tax assessed value (TAV),” meaning the valuethat’s listed on your property tax bill. Other lenderswill use a market value determined by recent sale pricesof nearby homes that are similar to yours and homesales trends in your local area. Your lender may haveyour home appraised by a professional to determineits value.Most owner-occupied detached houses and condoscan be used to secure a HELOC; however, there maybe restrictions on the use of other property types,such as rental homes, condo-tels, agriculturalproperties and leasehold properties. To obtain aHELOC from Bank of Hawaii, your property must belocated in Hawaii or Guam.If you have an existing HELOC or home equity loan,that debt must usually be paid off with an initial drawfrom your HELOC or other funds before you can useyour new HELOC for other purposes.Home Value 700,00085% of Value 595,000Mortgage BalanceMaximum HELOCCredit Limit 350,000 245,000Subtractthe balance16
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I IC H A P T E R 3 P L A N N I N G F O R YO U R H E LO CIf you have an existing HELOC orhome equity loan, that debt mustusually be paid off with an initialdraw from your HELOC or otherfunds before you can use yournew HELOC for other purposes.17
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I IC H A P T E R 3 P L A N N I N G F O R YO U R H E LO CChoosing a HELOCthat’s Right for YouPlanning for RateIncreasesTo choose a HELOC that’s right for you, think carefullyabout how you want to use your HELOC, how much youintend to draw, and when and how you’ll repay the sumsyou borrow.Since HELOCs usually feature a variable interest rate,your monthly payment could go up if market rates rise.For example, perhaps you’d like to keep your monthlypayments as low as possible and make those paymentsfor a longer period of time. Or maybe you’d rather havea longer introductory rate period, or the option to fixthe rate with a fixed rate loan option. A loan officer canhelp you compare your options and choose a HELOCthat will work the way you want it to.To reduce the risk that you won’t be able to afford yourHELOC at some point down the road, think carefullyabout how high a limit you want before you apply. Justbecause you can borrow a certain amount doesn’t meanyou should. In many cases, a smaller HELOC is moreprudent, since it gives you some financial leeway whenrates change.One way to compare HELOCs is to look at the currentfully indexed variable annual percentage rate (APR),which gives you an example of what the cost of yourHELOC may be at the start of your draw period if yourintroductory rate didn’t exist. Since HELOC rates arevariable, you might never pay that exact rate, but it’sstill useful for comparison purposes. The fully indexedvariable APR that will apply when your introductoryrate ends depends on market rates at that time andother factors.If a HELOC doesn’t fit your needs, you may want toconsider other options, such as a home equity loan, amortgage refinance with cash out or a personal loan.The fully indexed variableAPR that will apply whenyour introductory rate endsdepends on market rates atthat time and other factors.18
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I IC H A P T E R 3 P L A N N I N G F O R YO U R H E LO CPlanning forRepaymentFrom the first day that you’re approved for yourHELOC, you should be thinking about the end ofyour draw period and how you’ll handle making thesignificantly higher payments that kick in during yourrepayment period. Mark your calendar far in advanceand check with your lender periodically so you won’tbe surprised by higher payments when your repaymentperiod begins.If you’re planning to use a future increase in income,such as a raise, a commission, a bonus or an inheritance,to pay off your HELOC, you should make a contingencyplan in case you don’t receive that windfall when youexpect it.If you’re planning to pay off your HELOC by selling yourhome, calculate whether your anticipated sale pricewill be enough to repay your HELOC as well as yourmortgage and closing costs.You may be able to avoid a balloon payment if you makebigger payments during your draw and/or repaymentperiods. The more principal you pay off early, themore you may be able to shrink or even eliminate yourballoon payment.The more principal you pay off early, themore you may be able to shrink or eveneliminate your balloon payment.An online mortgage calculator can help you figure outhow much principal you want to pay. Enter your loanamount, rate and term to find out how much you’dneed to pay each month to pay off your HELOC by theend of its term and then work backward from there todetermine how much you want to pay.Making larger payments means you won’t have the lowmonthly payment you may have wanted when you gotyour HELOC, but repaying principal can give you peaceof mind that your balloon payment will be smaller oreven zero.19
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I IC H A P T E R 3 P L A N N I N G F O R YO U R H E LO CEnd-of-Draw OptionsIf you’re not comfortable with the higher paymentsduring the repayment period, or cannot pay the largeballoon payment at the end of the HELOC, you haveseveral options to consider.OPTION1OPTIONTalk to your lenderRefinance into a newHELOCIf you believe you won’t have the money to make aballoon payment, your first step should be to contactyour lender as soon as possible and ask about options.The lender may offer a special promotion to move to anew financial product so they can keep your business,work with you to refinance the outstanding balance orlengthen the term of the loan to provide you enoughtime to pay it off.Refinancing into a new HELOC gives you moreflexibility to repay your principal because you’ll geta fresh draw period with interest-only payments andpossibly a new introductory rate for a limited time.You’ll also have the ability to draw additional funds.Of course, if you have the cash available, you canpay off your HELOC rather than making the higherpayments and possibly a balloon payment as well. Youcan call your lender and request a payoff quote that willshow the exact amount you’ll have to pay to close outyour HELOC.Keep in mind that your new HELOC probably will havea variable rate, so your rate and payment could rise ifmarket rates go up.2You’ll need good credit and equity in your home torefinance into a new HELOC.If you refinance into a new HELOC with a fixed-rateconversion option, you can convert your existingHELOC balance into a fixed-rate loan and draw anyadditional remaining funds, up to your new limit. Again,you’ll need good credit and equity in your home tomake refinancing your HELOC viable.20
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I IC H A P T E R 3 P L A N N I N G F O R YO U R H E LO COPTION3OPTIONRefinance into a homeequity loanRefinance into a newmortgageRefinancing into a home equity loan, instead of aline of credit, will give you a fixed monthly paymentand term with no balloon payment. You’ll need goodcredit to qualify and you won’t be able to drawadditional funds.Rather than make two home payments—one for yourmortgage and one for your HELOC—you might preferto refinance both your mortgage and HELOC into anew mortgage. If you refinance with a 15-year term,you’ll probably have a higher payment than you wouldwith a 30-year term, but you’ll pay off your mortgagesooner and may reduce your interest expense thanksto a lower interest rate.4You’ll have to pay closing costs to refinance into a newmortgage. The closing costs for a new mortgage willlikely be higher than they would be for a new HELOC,but there may be situations in which refinancing makessense, such as if you can lock in a lower interest ratethan your original mortgage.If you currently owe more than what your home isworth, refinancing may not be an option for you.21
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I ICHAPTER 4How to Apply for a HELOCHow to Get StartedThe first step to getting a HELOC is to figure out whyyou want a line of credit and whether you’re readyto apply based on your credit score, DTI and equityin your home. You can do this on your own, usingreputable online resources, or enlist the help of afinancial expert, who can review your plans anddouble-check your calculations.After that, you’ll need to complete a loan application.Your relationship banker can walk you through it or youcan apply online on your own.When you fill in the application, you’ll need to statehow much you want to borrow, whether you’re applyingalone or with a co-borrower, and how you intend touse your HELOC. You’ll need to provide your name,home address, mailing address, if it’s different fromwhere you live, Social Security Number, date of birth,email address, telephone numbers and employmentinformation.The rest of the application is designed to give yourlender a snapshot of your financial situation, includingyour monthly income, assets (e.g., stocks, bonds orretirement accounts) and existing mortgage or otherhome loan, if you have one. You’ll also need to list anydebt you plan to pay off with your HELOC, such as acar loan, personal loan or credit-card accounts.22
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I IC H A P T E R 4 H OW TO A P P LY F O R A H E LO CDocumentationAlong with your application, you’ll have to provide documentationas you would for most other types of home loans.If you’re a wage earner, you’ll need to supply copies of your pay stubsfor the last 30 days and your W-2 form for the last year.If you’re self-employed, you’ll need to provide copies of your signedpersonal income tax returns, current-year General Excise Tax filings,current-year profit-and-loss statements and other documents relatedto your business.Examples of other documentation requirements include: If your home is in Hawaii: Copies of your fire and hurricaneinsurance policies. If your home is in Guam: Copies of your fire and typhooninsurance policies. If your home is in a designated flood hazard zone: A copyof your flood insurance policy. If your home is a condominium: A copy of your homeowner’sor condo association insurance policy. If your home is held in a trust: A copy of your trust documents. If you purchased your home or refinanced your mortgagewithin the previous six months: A copy of your HUD-1Settlement Statement.23
T H E C O M P L E T E G U I D E TO G E T T I N G A N D U S I N G A H O M E EQ U I T Y L I N E O F C R E D I T I N H AWA I IC H A P T E R 4 H OW TO A P P LY F O R A H E LO CDisclosuresLike other types of home loans, HELOCs come with disclosures that you should readto make sure you understand how your loan works.Pay close attention to:Your introductory rateThe date when your introductory rate endsThe current fully indexed APRThe margin, or amount above the index rate that you’ll payThe minimum and maximum interest ratesThe terms of your fixed-rate loan conversionoption, if your HELOC has
We’re here to help! This resource guide will walk you through everything you need to know about HELOCs, from understanding introductory rates to the documents you’ll need to apply. The median price of a single-family home on Oahu has risen by 140,000 in the past five years, meaning yo
