Earn cash back
after close!
With Home Connect, you could earn $350 to $9,500 cash back after close.
Key Points
- You now have the option to access your home equity with a Pennymac HELOC
- A HELOC provides a revolving line of credit backed by the equity in your home
- During the HELOC’s draw period, you can access available funds as needed, up to the credit limit
- The new HELOC joins Pennymac’s home equity loan and cash-out refinance offerings, giving you more options to consider
You spend years building equity in your home. Now, there is a new way to tap into it.
Meet the Pennymac home equity line of credit (HELOC), the newest addition to your home equity solutions. It joins Pennymac’s home equity loan and cash-out refinance options, expanding the choices available to you as your financial needs evolve.
Introducing Pennymac’s HELOC
The Pennymac HELOC gives you more flexibility in how and when you borrow against your home equity. It works as a second mortgage, keeping your existing first mortgage in place.
A HELOC provides a revolving line of credit. Unlike a home equity loan, which provides funds in one lump sum, a HELOC lets you draw from your available credit line as needs arise. This can be useful for expenses that come up at different times or when you don’t know exactly how much you’ll need upfront.
Here’s how a HELOC works:
- Establish your credit line: Your available credit is determined based on factors including your home’s value, the amount you owe on loans secured by the property and eligibility requirements.
- Draw funds when you need them: During the draw period — the set time when your credit line is available — you can borrow funds as needed, up to your available limit.
- Pay based on what you borrow: As you use your credit line, your required payments cover interest on your outstanding balance. Once the draw period ends, you can no longer borrow from the line and must begin repaying the remaining balance according to your loan terms.
Key Features of the Pennymac HELOC
Pennymac’s HELOC is designed for eligible homeowners who want ongoing access to available home equity rather than a single lump-sum distribution.
Key features of the Pennymac HELOC include:
- Credit lines from $25,001 to $500,000: Choose from a range of line amounts based on your eligibility and available home equity.
- 3- or 5-year draw periods: Access funds from your available credit line during the draw period you select, subject to the terms of your HELOC.
- Interest-only payments during the draw period: During this time, your required payments cover only the interest on the outstanding balance.
- A repayment period after the draw period: Once the draw period ends, you can no longer borrow from the line and will begin making principal and interest payments.
- A variable interest rate: Your rate is based on the Prime Rate plus a fixed margin and can change monthly, which means your payment can change.
- An initial draw requirement: At closing, you’ll need to draw at least $25,001 or 75% of your total credit line, whichever is greater. For example, with a $100,000 credit line, your initial draw would need to be at least $75,000.
- No mortgage insurance requirement: Mortgage insurance is not required for the Pennymac HELOC.
- Keep your first mortgage in place: The HELOC is a second lien, allowing you to access available equity without replacing your first mortgage.
Who May Be Eligible for a Pennymac HELOC?
Eligibility depends on factors including your credit, available home equity and property. Current requirements include:
- Existing mortgage: You must have an eligible first mortgage with Pennymac.
- Credit score: A minimum FICO® Score of 740.
- Available home equity: For credit lines up to $250,000, your HELOC and other loans secured by your home can total up to 85% of your home’s value. For credit lines above $250,000, the limit is 80%.
For example, if your home is valued at $500,000 and you owe $300,000 on your first mortgage, an 85% combined loan-to-value limit would allow up to $125,000 in additional borrowing, assuming the property secures no other loans and that you meet eligibility and other requirements.
- Property: Eligible property types include attached or detached one-unit homes, attached or detached planned unit developments (PUDs) and condominiums. The property must be your primary residence.
- Location: Pennymac HELOCs are currently available in select states. Check with a Pennymac Loan Expert to confirm availability and eligibility in your area.
Additional credit, income, property and underwriting requirements apply.
What Else Should You Know?
A few other details are helpful to know before you apply:
- Fund access: After your initial draw at closing, there is a 90-day period before you can make additional draws. After that, you can access your available credit during your draw period, with a $1,000 minimum for subsequent draws.
- Home value: As with any home equity option, Pennymac will need to determine your home’s value as part of the HELOC process. Depending on your credit line amount and property, this may involve an automated valuation with an exterior property inspection, an exterior-only appraisal, or a full appraisal.
When to Consider a HELOC
Some expenses don’t happen all at once, which is where a HELOC can be useful. Because you can draw from your available credit line during the draw period, it can provide flexibility for expenses that unfold in stages or don’t have a predictable final cost.
For example, homeowners may want to consider a HELOC for:
- Home remodels, renovations or repairs: Access funds as different project phases are completed or new costs arise.
- Education expenses: Cover eligible costs that may come due at different points throughout the year.
- Large or unexpected costs: Have access to available funds when a significant expense comes up.
How a HELOC Expands Pennymac’s Home Equity Options
With the Pennymac HELOC, you have another way to access your home equity. Here’s how it compares with a home equity loan and cash-out refinance.
HELOC: A HELOC provides a revolving line of credit that you can draw from as needed, up to your available limit. It has a variable interest rate and works as a second mortgage, leaving your existing first mortgage in place.
Home equity loan: A home equity loan also keeps your first mortgage in place but provides the borrowed funds in one lump sum. With a fixed rate and fixed monthly payments, it may be a good fit when you know how much you want to borrow and prefer predictable payments.
Cash-out refinance: A cash-out refinance replaces your existing mortgage with a new, larger mortgage and provides a portion of your available equity as cash. Because you’re taking out a new first mortgage, your rate, term, balance and monthly payment may change. Which option fits your needs depends on more than how much equity you have. Consider the following as well:
- How much you want to borrow and the costs to do so
- When you’ll need the money
- Your current mortgage terms
- How the payments fit into your budget
- Your plans for the home, such as if you anticipate moving in the near future
Getting Started With a Pennymac HELOC
The arrival of the Pennymac HELOC marks an exciting next step in how we serve you throughout your homeownership journey. Learn more about the new HELOC and connect with a Pennymac Loan Expert to see if it might be right for you.
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