Everything UCCU Members Need to Know About What Makes a HELOC Different from a Home Equity Loan
Homeownership comes with many perks—and one of the biggest is the power to leverage your home’s equity for important financial needs. Whether you’re renovating your home, consolidating debt, or paying for education, the equity you’ve built through your UCCU mortgage can become a valuable financial tool. Understanding what makes a HELOC different from a home equity loan is key to determining the best option for your needs.
But how should you tap into this equity?
At Utah Community Credit Union (UCCU), our members have access to two powerful options: a Home Equity Line of Credit (HELOC) and a Home Equity Loan. While both options allow you to borrow against your home’s value, they serve different purposes and offer different terms.
This comprehensive guide walks you through the core differences between a HELOC and a home equity loan, highlights their pros and cons, and gives you real-life scenarios to help you decide which option fits your unique goals. Most importantly, it aligns with UCCU’s commitment to financial literacy, responsible lending, and community-focused service.
Understanding Home Equity with UCCU
Home equity is the value of your ownership stake in your home. It increases as you pay off your mortgage or if your home’s market value appreciates. Let’s say your home is worth $400,000, and your current mortgage balance is $250,000—your equity would be $150,000.
At UCCU, we help members make smart use of this equity. Whether you’re financing a large project or preparing for future needs, accessing your home’s value responsibly is a smart move.
Ways to Borrow Against Your Home Equity
When you’re ready to tap into your equity, UCCU offers two main solutions:
- Home Equity Loan: Best for members who need a lump sum for a specific purpose and want the certainty of fixed monthly payments.
- HELOC (Home Equity Line of Credit): Ideal for those who want ongoing access to funds for projects that span months or years.
Let’s explore both in detail.
What Is a UCCU Home Equity Loan?
A home equity loan from UCCU is essentially a second mortgage. It gives you a lump-sum payout upfront, and you repay it in fixed monthly payments over a set term—typically between 5 and 15 years.
Key Benefits of UCCU Home Equity Loans
- Fixed Interest Rates: No surprises—your rate and payments stay the same for the life of the loan.
- Large Sum Upfront: Great for big, one-time expenses like a full kitchen remodel or medical bills.
- Lower Rates Than Personal Loans: Since your home is collateral, you get better rates than unsecured options.
Potential Drawbacks
- Less Flexibility: Once you take out the loan, you can’t re-borrow without applying again.
- Home as Collateral: Failing to repay puts your home at risk.
- Upfront Costs: There may be closing costs or fees depending on your loan terms.
How UCCU Structures Home Equity Loans
When you apply for a home equity loan with UCCU:
- We evaluate your equity to determine how much you can borrow.
- You receive a lump sum once approved.
- Your payments begin immediately, and they remain fixed until the loan is paid off.
This structure is ideal for budgeting and long-term planning—something many UCCU members appreciate.
Real-World Example: UCCU Member Uses Home Equity Loan for Renovations
One of our members, the Anderson family in Orem, Utah, used a home equity loan to complete a $40,000 basement renovation. They chose a 10-year fixed term and appreciated the stability of fixed monthly payments. With UCCU’s guidance, they avoided overextending themselves and stayed on budget.
What Is a UCCU HELOC?
A Home Equity Line of Credit (HELOC) works more like a credit card. You receive a line of credit—say $75,000—and can borrow against it as needed. You’ll only pay interest on the amount you actually use, not the total line.
Key Benefits of a UCCU HELOC
- Access Funds as Needed: Draw funds for months or years during the draw period (typically 10 years).
- Interest-Only Payments: During the draw period, you can make lower interest-only payments.
- Digital Convenience: Transfer funds from your HELOC via UCCU’s mobile banking app or online platform.
Potential Drawbacks
- Variable Rates: Rates may increase over time, making monthly payments less predictable.
- Repayment Phase: Once the draw period ends, your payments increase as you begin repaying principal and interest.
- Requires Financial Discipline: Easy access to funds can tempt overspending if not managed carefully.
How Does a UCCU HELOC Work?
- Apply and qualify based on your equity and credit.
- Receive a line of credit you can borrow from at any time.
- Use the funds during the draw period, repaying only interest if you choose.
- Enter the repayment phase after 10 years, where you begin paying back principal.
Real-World Example: UCCU Member Uses HELOC for College Expenses
Another member, Jen from Spanish Fork, used a UCCU HELOC to fund her daughter’s college tuition over four years. She appreciated the ability to draw funds each semester and make interest-only payments while managing other family expenses.
Key Differences: UCCU HELOC vs Home Equity Loan
| Feature | Home Equity Loan | HELOC |
| Disbursement | Lump sum | Borrow as needed |
| Interest Rate | Fixed | Variable |
| Payment Type | Fixed monthly payments | Interest-only during draw period |
| Best For | One-time expenses | Ongoing or flexible expenses |
| Digital Access | Manage via UCCU online banking | Fully accessible via mobile and web |
| Risk Profile | Predictable payments | Requires management of variable rates |
How to Choose the Right Option for You
When to Choose a UCCU Home Equity Loan
- You have a defined expense (e.g., new roof, debt consolidation).
- You want certainty and stability in repayment.
- You prefer a structured payoff plan.
When a UCCU HELOC Might Be Better
- Your expenses are spread out over time (e.g., tuition, phased remodels).
- You want to borrow flexibly and only when needed.
- You are comfortable managing variable interest rates.
UCCU financial specialists are always available to help you compare and choose.
The Bigger Picture: UCCU’s Commitment to Financial Wellness
Using your home equity is a serious decision—and UCCU is here to make sure it’s the right one. We don’t just offer products; we offer personalized guidance rooted in decades of experience.
Whether you’re planning, borrowing, or repaying, our goal is to support your financial wellness every step of the way.
FAQs: Home Equity Borrowing at UCCU
1. How do I apply for a HELOC or home equity loan at UCCU?
Apply online at uccu.com, visit a branch, or speak with a lending advisor for personalized assistance.
2. What’s the difference in approval time between a HELOC and home equity loan?
Both typically take a few business days, depending on your documentation and equity evaluation.
3. How much can I borrow from UCCU?
Loan amounts vary based on your home value, remaining mortgage, and credit score—but generally, members can borrow up to 85% of their home’s appraised value.
4. Are there early repayment penalties?
No. UCCU allows you to repay either loan early without prepayment penalties.
5. Can I use the funds for anything?
Yes. Home equity funds can be used for renovations, education, emergencies, debt consolidation, or even travel.
6. Can I switch from a HELOC to a home equity loan later?
You may be eligible to refinance or restructure based on your needs. UCCU lending experts can guide you through options.
Final Thoughts: Let UCCU Help You Unlock the Power of Your Home
When used wisely, your home equity can support your biggest goals. At UCCU, we’re proud to offer flexible, affordable borrowing options—along with expert advice you can trust.
Whether you’re looking for financial predictability through a home equity loan or the flexible spending power of a HELOC, we’ll help you make the choice that fits your life today—and sets you up for success tomorrow.