1
THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
Getting and Using
a Home Equity Line of Credit
in Hawaii
The Complete Guide to
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
TABLEOF
CONTENTS
Introduction to HELOCs 6
• What Is a HELOC 6
• How You Can Use a HELOC 7
• Who Is a HELOC Right For 9
CHAPTER
PREFACE
How HELOCs Work 10
• Monthly Payments 10
• Draw and Repayment Periods 11
• Interest Rates 12
• Fixed-Rate Conversion Option 13
CHAPTER
Planning for Your HELOC 14
• Understanding Your Credit Score 14
• Understanding Your Debt-to-Income Ratio 15
• Understanding Your Home’s Value 16
• Choosing a HELOC That’s Right For You 18
• Planning for Rate Increases 18
• Planning for Repayment 19
• End-of-Draw Options 20
How to Apply for a HELOC 22
• How to Get Started 22
• Documentation 23
• Disclosures 24
• Closing Costs 25
• Fees 26
CHAPTER
CHAPTER
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
Owning a home in Hawaii is a major life accomplishment.
Not only does it give you a secure place to live and build
a family, it can be an effective way to build wealth and
improve your personal finances.
For example, once you’ve built up some equity in your
home, you can apply for something called a home equity
line of credit (HELOC). This line of credit leverages
your home’s equity to give you access to funds with an
affordable rate and flexible terms. Whether your goals
include consolidating debt, making home renovations,
financing education expenses or paying for a major life
event such as a wedding, a HELOC could be the solution.
Home
Equity
Line
Of
Credit
HELOC
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
Given the advantages, and the current low
interest rates, it’s no wonder that an increasing
number of homeowners are taking out HELOCs.
Property research company ATTOM Data
Solutions reported that almost 350,000 HELOCs
were originated for U.S. residential properties in
just one quarter in 2018, up 14 percent compared
with the prior year.
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
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 buying
the property or appreciation in your home’s market value. The median price of a
single-family home on Oahu has risen by $140,000 in the past five years, meaning
you may have a lot more equity in your home than you think.
However, although HELOCs can offer substantial benefits, they also come with
some very specific requirements and restrictions, as well as the inherent risk
involved with borrowing money. Before you apply for a HELOC, you should think
about how you want to use it, read the disclosures so you understand how it works
and make sure you’re comfortable with the risks. If you plan carefully and take the
right 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 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 you may
have a lot more equity in
your home than you think.
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
Introduction to HELOCs
CHAPTER
What is a HELOC?
A HELOC is a credit line that’s secured by your home. It
works somewhat like a credit card, in the sense that you
can borrow various amounts at different times and, when
you’ve hit your limit, you can repay those amounts and
borrow again. Your limit is determined by your lender,
based on your income, the amount of equity you have in
your home and your creditworthiness.
You can generally borrow up to 85 percent of your
home’s value, minus the amount you still owe on
the mortgage loan. For example, if your property is
appraised at $400,000 and you owe $150,000, you
would calculate 85 percent of the total value, which
comes to $340,000. Then subtract $150,000, giving
you a maximum line of credit of $190,000.
Have Questions?
Ready to Apply?
Visit boh.com or
call 808-693-2222
to get started.
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
How You Can Use a HELOC
Since a HELOC is secured by your home, it should be used for purposes that could
improve your financial situation or quality of life, such as debt consolidation, home
renovations and education expenses.
CHAPTERINTRODUCTIONTOHELOCS
DEBTCONSOLIDATION lets you combine
your credit card accounts, personal loans,
car loans and other debt into one monthly
payment, oen at a lower interest rate than
you would have otherwise paid. Using a
HELOC this way could potentially save you
money and help you pay off your debt with
one monthly payment instead of managing
multiple bills. Be careful not to take on new
credit card debt while doing this, as you
could end up with an even larger total debt.
1
2
HOMERENOVATIONSinclude repairs,
like fixing an older roof or replacing
a damaged sewer pipe, and major
improvements, such as building an
addition, remodeling your floor plan,
installing new windows, updating
your kitchen or bathrooms or adding
a backyard deck or a swimming pool.
Repairs and improvements can boost
the value of your home by quite a bit,
making a HELOC a sound investment.
If you use your HELOC to repair or
improve your home, you may be able
to deduct the interest you pay on your
HELOC when you file your income tax
returns. Consult a tax advisor to find
out the details.
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
And, since it’s a line of credit, you can also take
advantage of all the features that come with
this kind of financing. For example, as you start
to pay down the balance of your HELOC, you’ll
gain access to that cash to use for whatever
you’d like, at a lower interest rate than you’d
likely be able to get with a credit card or
unsecured personal loan. With this method,
you also may be able to refinance with no
application or appraisal fees, and virtually or no
closing costs (depending on your line amount,
lien position, property type and property
location).
3
If you’d like to REFINANCEYOURMORTGAGE,
a HELOC can be a cost-effective way to not
only take advantage of low rates but also turn
your mortgage into a flexible line of credit. Even
though you’re taking out a line of credit rather
than another closed-end mortgage, you can
benefit from many of the same features as a
conventional refinance would offer, including:
• Interest rates that are competitive with
current mortgage rates.
• Repayment terms that are more convenient
for your goals and budget—anywhere from
3, 5 or 7 years up to 15, 20 or 30 years.
• The ability to access cash by applying and
qualifying for a HELOC larger than the
remaining balance on your mortgage
4
When it comes to TUITIONLOANS, there are a
few instances in which a HELOC makes sense
(if, for example, you’re able to pay off the loan
while interest rates are still low), but in most cases
there will usually be other loan vehicles, including
financial aid and structured student loans, that make
for better options. Consider using a HELOC for
other education expenses, such as books, school
supplies, student fees, travel to and from campus
and so on. A HELOC may also be a good option to
help finance the cost of private elementary and/or
high school education.
A HELOC typically shouldn’t be used for daily
living expenses, such as groceries or utility bills,
luxury goods, family vacations, stock market
investments or risky business ventures. This is
because a HELOC uses your house as collateral,
unlike credit cards or other unsecured debt. If
you don’t repay the loan, the lender can take
your house.
CHAPTERINTRODUCTIONTOHELOCS
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
Who is a HELOC Right For?
A HELOC might be what you’re looking for if the
following applies to you:
You should also have a good understanding of how a
HELOC works.
You have a good credit history.
You want the flexibility
of a credit line.
You’re comfortable with
the concept of a variable
interest rate, and are able
to handle potential higher
payments in the future.
You understand that, if you
don’t repay your HELOC,
your lender could foreclose
and you could lose your home.
You have equity in your home.
You want to consolidate
other debt, make home
renovations or you have
other financial needs.
CHAPTERINTRODUCTIONTOHELOCS
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
PRINCIPALis the amount of money you have borrowed.
INTERESTis what the lender charges for lending you
the money. It is usually disclosed as a percentage rate
(daily periodic rate and/or annual percentage rate) for
what you borrow.
Some HELOCs feature a final payment called
aBALLOONPAYMENTbecause it is usually much
larger than a normal monthly payment. It can be tens
of thousands of dollars, or more. This balloon payment
generally occurs because your HELOC’s amortization
period is longer than its term, so your monthly
payment doesn’t pay off your balance even during
your repayment period. This structure gives you the
flexibility of asmaller monthlypayment, but can result
in payment shock when the balloon payment is due if
you haven’t prepared for it.
How HELOCs Work
CHAPTER
Monthly Payments
Depending on where you are in your HELOC’s term,
your monthly payment may be composed of a mix of
interest and principal, or only interest.
To get the most out of your HELOC, it’s important to understand how it works and
what you can expect from it. Let’s run through the basics.
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII CHAPTERHOWHELOCSWORK
A HELOC typically features a draw period and a repayment period. The duration of each period
varies, depending on the term of your HELOC.
DRAWPERIODDuring your draw period, you can
borrow from your HELOC up to your credit limit. Each
time you draw funds, you may be able to draw as much
or as little as you want or you may be required to draw
at least a minimum amount. A minimum initial draw may
also be required.
If you repay all or part of your principal during your
draw period, your available credit will be replenished
and you can draw against it again if you choose to.
This flexibility is a key feature of a HELOC.
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 account
During your draw period, your required monthly
payment will most likely be interest-only; however,
you can also repay principal during this period if you
choose. Paying principal as well as interest during your
draw period could help you avoid a large final payment,
known as a balloon payment, when your HELOC
ends. It can also reduce monthly payments during the
repayment period.
REPAYMENTPERIODAt the end of your draw period,
your HELOC enters a repayment period, which may
last as long as 10 or 20 years.
During the repayment period, you will no longer be
able to withdraw funds and your required monthly
payment will increase (if you were making interest-
only payments) to repay your balance. Depending on
how your monthly payments are structured, you may
also have a balloon payment at the end in order to
completely repay your balance.
Draw and Repayment Periods
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
Interest Rates
Most HELOCs start with a low introductory rate for
the first 12, 24, 36 or 48 months. You may be offered
an introductory rate for one period or a choice of
introductory rates with a corresponding time frame.
The lowest rate will usually expire the soonest while
the highest rate will likely last the longest.
You may get an additional rate discount if you agree
to have your monthly HELOC payment withdrawn
automatically from your checking account. An
AUTOPAYRATEDISCOUNT is a great way to save
money with your HELOC, and will help ensure that
you’re making each payment on time.
When your introductory rate ends, your HELOC rate
will increase to a fully indexed variable rate that’s based
on an index, such as the U.S. Prime Rate, plus a margin.
The variable rate will fluctuate up and down as market
rates change. Whenever your rate changes, your
monthly payment will also change.
An autopay rate
discount
is a great way to
save money with
your HELOC, and
will help ensure that
you’re making each
payment on time.
CHAPTERHOWHELOCSWORK
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII CHAPTERHOWHELOCSWORK
There may be a periodic rate cap that limits the
amount of percentage points that your rate can
increase during any given adjustment. You may also
have a lifetime cap that defines the maximum interest
rate that can be applied to your HELOC. You may
also have a lifetime cap that defines the maximum
interest rate that can be applied to your HELOC, as
well as a minimum, or floor rate.
Even aer they convert to the variable rate, HELOCs
generally feature lower rates than other types of
loans, such as credit cards. That’s because a HELOC
is secured by your home as collateral, reducing the
risk to the lender.
The low introductory rates that come with HELOCs
can be very enticing, but you should also consider
the fully indexed rate that will apply aer the
introductory rate period ends. Closing costs, fees
and balloon payments may also differ, sometimes
substantially, from one lender to another. It pays to
do some comparison shopping before settling on
your lender.
HELOCs generally feature
lower rates than other types
of loans, such as credit cards.
That’s because a HELOC
is secured by your home as
collateral, reducing the risk
to the lender.
Fixed-Rate Loan Option
A HELOC fixed-rate loan option allows you to convert
all or part of your credit line into a fixed-rate loan.
Your monthly payment for this portion of your debt
usually will be higher aer you convert it because
your payment will be composed of both principal and
interest instead of only interest.
A fixed-rate loan option may be helpful if you want
to lock in a fixed rate and payment for a portion of
your HELOC. It could also help you shrink or avoid
a balloon payment at the end of your repayment
period.
If you convert your entire HELOC to a fixed-rate loan
option, you may not be able to draw additionalfunds.
If you convert only a portion of your HELOC, your
subsequent draws on the remainder will still be at
variable rates.
Your lender may limit how many fixed-rate loan
options you can have at one time. The limit, if there
is one, is usually three to five.
You may be charged a fee to convert all or part
of your HELOC to a fixed-rate loan option.
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
Planning for Your HELOC
CHAPTER
Understanding Your
Credit Score
When you apply for a loan, your loan officer
typically will pull your credit score to assess your
creditworthiness. When it comes to applying for a
HELOC, generally speaking, lenders require a score
of at least 680 or higher, although this may vary from
lender to lender. If you’ve got excellent credit, say
750 or higher, you may qualify for more attractive
HELOC interest rates, or possibly higher limits.
If you have a low credit rating, clickherefor a guide
that explains the best ways to raise your score.
To qualify for a HELOC, you’ll have to meet the lender’s minimum requirements for
your credit score, debt-to-income ratio, home value and other factors. You’ll also want
to plan ahead through the lifespan of your potential HELOC, to make sure you’re
prepared to use and repay it. Here are the basics you need to know when preparing
to apply for a HELOC.
300-620
CREDITSCORE

621-749
750-850
EXCELLENT
FAIR
POOR
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
Your Debt-to-Income
Ratio Explained
CHAPTERPLANNINGFORYOURHELOC
Yourdebt-to-income ratio(DTI) compares your monthly income to your monthly
debt obligation, which includes payments for your mortgage, car loans, student
loans, credit cards, personal loans and any other debt you have. Your monthly
living expenses, such as groceries, utility bills, gasoline, and cellphone and
Internet services, are not usually included in your DTI.
To calculate your DTI, add up your monthly debt payments and divide that total
into your monthly pre-tax income. The result will be a percentage.
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 debt
before you can qualify for a HELOC. Paying off debt
with the highest monthly payment first will improve
your DTI the fastest, since it’s your payment, not
the total amount of debt that you have, that counts
toward your DTI.

DEBTTOINCOME
RATIO
MONTHLYSALARY
MONTHLYDEBT
PAYMENT
DTI
CALCULATION




Here’s an example:
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
Understanding Your
Home’s Value
Home Value
85% of Value
Mortgage Balance
Maximum HELOC
Credit Limit
$700,000
$595,000 $350,000 $245,000
Yourcombined loan-to-value ratio(CLTV) compares
the amount you owe for your mortgage and your
proposed HELOC credit line to your home’s value.
Your home’s value is important because your home
secures your HELOC.
When you apply for a HELOC, your CLTV generally
cannot be more than 85 percent of your home’s
value. That means your mortgage balance, plus your
HELOC credit limit, cannot exceed 85 percent of
your home’s value.
To calculate how much you may be able to borrow
with a HELOC, take 85 percent of your home’s value
and subtract the amount you owe for your mortgage.
For the purposes of calculating CLTV, your home’s
value isn’t the price you paid for it. Some lenders will
use the “tax assessed value (TAV),” meaning the value
that’s listed on your property tax bill. Other lenders
will use a market value determined by recent sale prices
of nearby homes that are similar to yours and home
sales trends in your local area. Your lender may have
your home appraised by a professional to determine
its value.
Most owner-occupied detached houses and condos
can be used to secure a HELOC; however, there may
be restrictions on the use of other property types,
such as rental homes, condo-tels, agricultural
properties and leasehold properties. To obtain a
HELOC from Bank of Hawaii, your property must be
located in Hawaii or Guam.
If you have an existing HELOC or home equity loan,
that debt must usually be paid off with an initial draw
from your HELOC or other funds before you can use
your new HELOC for other purposes.
Subtract
the balance
CHAPTERPLANNINGFORYOURHELOC
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII CHAPTERPLANNINGFORYOURHELOC
If you have an existing HELOC or
home equity loan, that debt must
usually be paid off with an initial
draw from your HELOC or other
funds before you can use your
new HELOC for other purposes.
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
The fully indexed variable
APR that will apply when
your introductory rate ends
depends on market rates at
that time and other factors.
Choosing a HELOC
that’s Right for You
Planning for Rate
Increases
To choose a HELOC that’s right for you, think carefully
about how you want to use your HELOC, how much you
intend to draw, and when and how you’ll repay the sums
you borrow.
For example, perhaps you’d like to keep your monthly
payments as low as possible and make those payments
for a longer period of time. Or maybe you’d rather have
a longer introductory rate period, or the option to fix
the rate with a fixed rate loan option. A loan officer can
help you compare your options and choose a HELOC
that will work the way you want it to.
One way to compare HELOCs is to look at the current
fully indexed variable annual percentage rate (APR),
which gives you an example of what the cost of your
HELOC may be at the start of your draw period if your
introductory rate didn’t exist. Since HELOC rates are
variable, you might never pay that exact rate, but it’s
still useful for comparison purposes. The fully indexed
variable APR that will apply when your introductory
rate ends depends on market rates at that time and
other factors.
If a HELOC doesn’t fit your needs, you may want to
consider other options, such as a home equity loan, a
mortgage refinance with cash out or a personal loan.
Since HELOCs usually feature a variable interest rate,
your monthly payment could go up if market rates rise.
To reduce the risk that you won’t be able to afford your
HELOC at some point down the road, think carefully
about how high a limit you want before you apply. Just
because youcanborrow a certain amount doesn’t mean
youshould. In many cases, a smaller HELOC is more
prudent, since it gives you some financial leeway when
rates change.
CHAPTERPLANNINGFORYOURHELOC
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
Planning for
Repayment
From the first day that you’re approved for your
HELOC, you should be thinking about the end of
your draw period and how you’ll handle making the
significantly higher payments that kick in during your
repayment period. Mark your calendar far in advance
and check with your lender periodically so you won’t
be surprised by higher payments when your repayment
period 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 contingency
plan in case you don’t receive that windfall when you
expect it.
If you’re planning to pay off your HELOC by selling your
home, calculate whether your anticipated sale price
will be enough to repay your HELOC as well as your
mortgage and closing costs.
You may be able to avoid a balloon payment if you make
bigger payments during your draw and/or repayment
periods. The more principal you pay off early, the
more you may be able to shrink or even eliminate your
balloon payment.
Anonline mortgage calculatorcan help you figure out
how much principal you want to pay. Enter your loan
amount, rate and term to find out how much you’d
need to pay each month to pay off your HELOC by the
end of its term and then work backward from there to
determine how much you want to pay.
Making larger payments means you won’t have the low
monthly payment you may have wanted when you got
your HELOC, but repaying principal can give you peace
of mind that your balloon payment will be smaller or
even zero.
CHAPTERPLANNINGFORYOURHELOC
The more principal you pay off early, the
more you may be able to shrink or even
eliminate your balloon payment.
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
Talk to your lender
OPTION OPTION
If you believe you won’t have the money to make a
balloon payment, your first step should be to contact
your lender as soon as possible and ask about options.
The lender may offer a special promotion to move to a
new financial product so they can keep your business,
work with you to refinance the outstanding balance or
lengthen the term of the loan to provide you enough
time to pay it off.
Of course, if you have the cash available, you can
pay off your HELOC rather than making the higher
payments and possibly a balloon payment as well. You
can call your lender and request a payoff quote that will
show the exact amount you’ll have to pay to close out
your HELOC.
Refinance into a new
HELOC
Refinancing into a new HELOC gives you more
flexibility to repay your principal because you’ll get
a fresh draw period with interest-only payments and
possibly a new introductory rate for a limited time.
You’ll also have the ability to draw additional funds.
You’ll need good credit and equity in your home to
refinance into a new HELOC.
Keep in mind that your new HELOC probably will have
a variable rate, so your rate and payment could rise if
market rates go up.
If you refinance into a new HELOC with a fixed-rate
conversion option, you can convert your existing
HELOC balance into a fixed-rate loan and draw any
additional remaining funds, up to your new limit. Again,
you’ll need good credit and equity in your home to
make refinancing your HELOC viable.
End-of-Draw Options
If you’re not comfortable with the higher payments
during the repayment period, or cannot pay the large
balloon payment at the end of the HELOC, you have
several options to consider.
CHAPTERPLANNINGFORYOURHELOC
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
Refinance into a home
equity loan
Refinancing into a home equity loan, instead of a
line of credit, will give you a fixed monthly payment
and term with no balloon payment. You’ll need good
credit to qualify and you won’t be able to draw
additional funds.
Refinance into a new
mortgage
Rather than make two home payments—one for your
mortgage and one for your HELOC—you might prefer
to refinance both your mortgage and HELOC into a
new mortgage. If you refinance with a 15-year term,
you’ll probably have a higher payment than you would
with a 30-year term, but you’ll pay off your mortgage
sooner and may reduce your interest expense thanks
to a lower interest rate.
You’ll have to pay closing costs to refinance into a new
mortgage. The closing costs for a new mortgage will
likely be higher than they would be for a new HELOC,
but there may be situations in which refinancing makes
sense, such as if you can lock in a lower interest rate
than your original mortgage.
If you currently owe more than what your home is
worth, refinancing may not be an option for you.
OPTION OPTION
CHAPTERPLANNINGFORYOURHELOC
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
How to Get Started
The first step to getting a HELOC is to figure out why
you want a line of credit and whether you’re ready
to apply based on your credit score, DTI and equity
in your home. You can do this on your own, using
reputable online resources, or enlist the help of a
financial expert, who can review your plans and
double-check your calculations.
Aer that, you’ll need to complete a loan application.
Your relationship banker can walk you through it or you
canapply onlineon your own.
When you fill in the application, you’ll need to state
how much you want to borrow, whether you’re applying
alone or with a co-borrower, and how you intend to
use your HELOC. You’ll need to provide your name,
home address, mailing address, if it’s different from
where you live, Social Security Number, date of birth,
email address, telephone numbers and employment
information.
The rest of the application is designed to give your
lender a snapshot of your financial situation, including
your monthly income, assets (e.g., stocks, bonds or
retirement accounts) and existing mortgage or other
home loan, if you have one. You’ll also need to list any
debt you plan to pay off with your HELOC, such as a
car loan, personal loan or credit-card accounts.
How to Apply for a HELOC
CHAPTER
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
Documentation
Along with your application, you’ll have to provide documentation
as you would for most other types of home loans.
If you’re a wage earner, you’ll need to supply copies of your pay stubs
for 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 signed
personal income tax returns, current-year General Excise Tax filings,
current-year profit-and-loss statements and other documents related
to your business.
Examples of other documentation requirements include:
• If your home is inHawaii:Copies of your fire and hurricane
insurance policies.
• If your home is in Guam:Copies of your fire and typhoon
insurance policies.
• If your home is in a designated flood hazard zone:A copy
of your flood insurance policy.
• If your home is acondominium:A copy of your homeowner’s
or 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 mortgage
within the previous six months:A copy of your HUD-1
Settlement Statement.
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
Like other types of home loans, HELOCs come with disclosures that you should read
to make sure you understand how your loan works.
Pay close attention to:
Disclosures
Your introductory rate
The date when your introductory rate ends
The current fully indexed APR
The margin, or amount above the index rate that you’ll pay
The minimum and maximum interest rates
The terms of your fixed-rate loan conversion
option, if your HELOC has one
Your draw period
Your repayment period
Your closing costs
Fees you will or may be charged
Whether you may have a balloon payment
when your HELOC ends
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
There may be closing costs for your HELOC. These
can range from half a percent of the total line of
credit to 2 percent or more. (So if you qualify for
$100,000 in credit, you could pay between $500
and $2,000 in closing costs). Some of the costs are
lender’s fees; others are paid to third parties.
Examples of HELOC closing costs include:
Most of these costs should be familiar to you from
when you originally purchased your home. It’s also
possible that your lender may waive some of their
fees as part of a promotion.
You can pay your closing costs in cash at closing or
you can choose a no-closing-costs HELOC. Be aware,
however, that these kinds of HELOCs simply package
your costs into the line of credit, potentially with
higher interest rates. Ask your loan officer for details.
Closing Costs
CHAPTERHOWTOAPPLYFORAHELOC
• Application fee
• Notary fee
• Escrow fee
• Title search and
insurance fees
• Property valuation
or appraisal fee
• Trust review fee
• Condo review fee
• Documentation fee
• Recording fee
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
Ongoing Fees
In addition to your closing costs, you may be charged a variety of fees while you have
your HELOC or if you want to cancel it before the term ends.
Examples of HELOC fees include:
This fee compensates your
lender for keeping your
HELOC open and active.
Annual fees may vary from
zero to around $100.
You may be charged this fee
if you choose to close your
HELOC before a specified date.
The fee may be a flat amount or
a percentage based on how long
you had your HELOC before
you decided to close it. You may
also be charged this fee if you
sell your home and pay off your
HELOC early for that reason.
This charge may be added
to your HELOC if you don’t
make your payment within 10
to 15 days of the due date.
If you don’t utilize your
HELOC, you may be charged
a monthly or annual fee to
keep it open.
You may be charged a fee
each time you draw funds from
your HELOC. It may be a flat
amount or a percentage of
your draw.
This fee compensates your
lender for the extra paperwork
that needs to be completed to
remove the recorded lien from
your home when you pay off
and close your HELOC.
ANNUALFEE LATEPAYMENTFEE TRANSACTIONFEE
INACTIVITYFEEEARLYPAYOFFOR
TERMINATIONFEE
LIENRELEASE/
PREPARATIONFEE
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
Expert Help Is Available
As you can see, choosing a HELOC requires a fair amount of research. Fortunately,
you don’t have to figure it all out alone. If you’re ready to consolidate debt, make
home renovations, pay education expenses or use a HELOC for other reasons,
we encourage you to contact us at Bank of Hawaii and find out how you can get a
HELOC that’s right for you.
Have Questions?
Ready to Apply?
Visit boh.com or
call 808-693-2222
to get started.
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
NOTES
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THE COMPLETE GUIDE TO GETTING AND USING A HOME EQUITY LINE OF CREDIT IN HAWAII
NOTES
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