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Welcome To The Insighter!

Explore the latest happenings at Kirtland FCU and learn about important topics from around the financial world. Here’s your insight!
To learn about retirements, investments and financial planning, check out Invested now.

There’s Money In These Walls: Secrets of Home Equity

Ashleigh, K-Staff

There’s one area of the economy that hasn’t slowed down in the wake of the COVID-19 pandemic—housing prices have soared.

In December 2020, the average sale price of a single-family detached unit in Albuquerque was up 18.4% year-over-year (Greater Albuquerque Association of Realtors, Dec. 2020 report). Additionally, the percent of list price received increased as well to 99.5%. That means that most of these homes are selling at or above asking price, a good indicator of strong property values.

According to the Greater Albuquerque Association of Realtors, low mortgage rates and strong buyer demand have carried this environment into 2021.

Even if you already own a home and aren’t looking to join this crowded market, this environment of increasing property values could mean that now is a great time to take advantage of your home equity.

What is home equity?

Home equity is the value in your home that belongs solely to you. When you take out a mortgage to pay for a home, your lender is a lienholder, meaning they have an interest in your home until the loan is paid back even though you are considered the homeowner. In simple terms, home equity is your home’s current value minus any mortgages or other liens—it belongs to you! Home equity can be a valuable asset if you understand how it works and how—and when—to use it wisely.

Since home equity starts with a valuation of your property, an increase in property value will increase the amount of equity in it. If your home is worth $250,000 and you currently have a mortgage with a balance of $200,000, you have $50,000 in equity. Now, assume in a few years, the home’s value increases to $400,000 riding on a rising housing market. By this time, you’ve paid your mortgage down and now owe $180,000.

Your equity is now $400,000-$180,000, or $220,000! Equity is often expressed as a percentage. Your equity in your home is now at 55%.

There are a few ways to convert the equity in your home into cash you can use for upgrades, remodels, and more—home equity loans and home equity lines-of-credit (HELOCs). Here are the main differences and features to consider if you're looking to take advantage of the equity in your home.

According to Balance Pro Financial:


Home equity loans and lines-of-credit typically offer higher interest rates than primary mortgages because the lender assumes greater risk – in the event of foreclosure, the primary mortgage will be repaid before any seconds.

However, because the loan is still collateralized, interest rates for second mortgages are usually much lower than typical unsecured debt, like charge cards, credit cards, and consolidation loans.

Home Equity Loans

A home equity loan is a fixed-rate option for converting your equity to cash. By using the equity as collateral, a lender will issue a lump-sum loan. You then have a fixed interest rate and period of repayment. Payments don’t fluctuate month to month.

Home Equity Lines-Of-Credit

A home equity line-of-credit (HELOC) also uses the equity in your home as collateral. The difference is you do not have to borrow—or draw—against that equity all at once. Instead, you can use the line-of-credit as it’s needed in the same way you would use a credit card during the draw period (the amount of time the line-of-credit is open. This period is 15 years with Kirtland FCU). This is called revolving credit. Interest rates on lines-of-credit are variable, meaning they may fluctuate based on the market and Prime Rate.
  Home Equity Loan HELOC
Interest Rate Fixed Variable
Payments Fixed, monthly Variable based on usage and interest rate, monthly
Terms (with Kirtland FCU) 10-15 years based on loan-to-value 15-year amortization and 9-year draw period
When to consider You need a large lump-sum.

You're planning for a remodel, event, or are considering debt.
You want to only use what you need, when you need it. 

You need an emergency fund.

Ready to learn more about home equity? Visit KirtlandFCU.org/HomeEquity. Learn more about this second mortgage option, see current Kirtland FCU rates, and apply instantly!

Membership eligibility required. See a representative for complete details. Kirtland Federal Credit Union is an equal housing lender. Financing available for properties in New Mexico only. Loan subject to credit approval and based on equity in home. Closing costs may vary based on transaction. Home equity loans and lines of credit are limited to 90% loan-to-value and $200,000; actual savings based on transaction amount. Borrower is responsible for homeowners insurance premiums and, if required, flood insurance premiums. Special restrictions may apply; contact a representative for complete details. Consult a tax advisor regarding deductibility of interest. As with all lending services, full disclosures, terms, and conditions will be supplied with your mortgage or home equity disclosures.
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