December 1, 2023Unlocking Your Home’s Equity: A Responsible Approach

One of the most significant financial benefits of being a homeowner is the ability to tap into your home’s equity. With a home equity loan, you can finance almost any project, and the borrowing costs are much lower than other loan options. 

As savings balances continue to shrink due to inflation, more people are exploring home equity loans to fill the financial gaps. However, is this a smart use of your home’s equity?  

In this article, we’ll look at what makes home equity loans so attractive and identify potential pitfalls to avoid. 

What is Home Equity?  

Home equity can best be described as the value or portion of your home that you own. To calculate your home’s equity, use the following formula: 

Home Equity = Current Market Value of Home – Mortgage Balance 

For example, if your home appraises for $400,000 and you still owe $250,000 on your mortgage, your home’s equity would be $150,000. As a homeowner, you could utilize a home equity loan to borrow a portion of this equity. (Each lender will have their own rules and policies on how much equity you can access).  

What Makes Home Equity Loans So Popular? 

It’s hard to pinpoint one aspect of home equity loans that people enjoy most because the benefits are vast. For many, it’s the combination of overall flexibility and affordability. Here are some of the key features of home equity loans that make them so attractive to homeowners: 

  • Affordability: 

Because home equity loans use your house as collateral, the financial risk to the lender is much lower than other borrowing options. Consequently, the interest rates charged are usually some of the lowest available.  

In addition, the loan terms are significantly longer than alternatives, such as personal loans. Most home equity loan terms range between seven to ten years (some lenders extend terms up to 20 years). 

The combination of a longer repayment period and lower interest rates make home equity loans extremely affordable overall.

  • Flexibility: 

Home equity loans are generally available in two formats: traditional home equity loan or home equity line of credit (HELOC). Your choice will come down to how you intend to use the funds.  

  • Home Equity Loan: A traditional home equity loan offers fixed interest rates, and the entire sum is dispersed at financing. This option is ideal if you know the cost of your project ahead of time, for example, a home remodel. PEFCU offers a Home Equity Loan. Click here to find out more about PEFCU’s Home Equity Loan. 
  • Borrower Limits: 

Depending on the value of your home and your current mortgage balance, you could have a significant amount of equity in your property. As a result, you could borrow much more with a home equity loan than alternatives, such as credit cards or personal loans. That is why home equity loans are ideal for pricey projects like home remodels. 

  • Spending Options: 

There are generally no limits on how you can spend these funds. This feature opens a range of possibilities for borrowers. Some common uses include: 

  • Home repairs or remodels 
  • Events like weddings or vacations 
  • Tuition or higher education costs 
  • Debt consolidation 
  • Medical bills or healthcare-related costs 
  • Starting a business 
  • Financial lifeline for emergencies 

Home Equity Loan Options with PEFCU 

Right now, PEFCU will cover your closing costs* when you are approved for a home equity loan! We’ll get you your money fast so you can start working on that home improvement project, consolidate your debt, start planning your wedding, or anything else you are looking to accomplish with your home equity loan!  


We’re Here to Help! 

If you’d like more information about PEFCU’s Home Equity Loan options, please click here. 

Home equity loans are one of homeowners’ most powerful borrowing options due to their flexibility, affordability, and unlimited ways to use them. However, as your financial partner, we want to ensure you make the best financial decisions. 

If you’re considering a home equity loan, we invite you to stop by and meet with a team member. Together, we’ll explore your financing options and determine which best matches your financial goals. To get started, please stop by any of our convenient branch locations or call 800-226-6673. 


Each individual’s financial situation is unique and readers are encouraged to contact PEFCU when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.  

*Offer valid as of 10/23/2023 and may be cancelled without notice. 

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