Home Loan Center

Home Equity Loans

How would you like to take an exotic tropical vacation in the middle of winter, or start those over due home improvements, or purchase that new boat you have always wanted? With a Northwoods Bank Home Equity Line of Credit, your options are virtually limitless and achievable Here's how it works.

A Northwoods Bank Home Equity Line of Credit is secured by the home, the interest you pay is usually tax deductible. In most cases, our Home Equity Line is tied to the prime rate, and you owe nothing on the loan until you begin to use the money.

Let me tell you how the line of credit works. You establish the line from the equity you have in your home. Then, when you're ready to add that deck, buy that boat, or redecorate, you simply write a check for the amount you want. It's just like paying cash. Your Home Equity Line of Credit checks are all you need for all your plans.

Stop in or call one of our friendly lending professionals and let them assist you in finding the best home equity loan to make your specific dreams come true.

Informational Tips about Home Equity Refinancing Home equity financing.

You can supplement your first mortgage with a smaller home equity loan or line of credit. Home equity financing lets you borrow against your current equity and - in the case of certain Northwoods Bank of Minnesota Home Equity loans - on the costs of qualifying improvements to your remodeled home.

Mortgage refinance or home equity financing - how do you decide?

It all boils down to the math. Find out how much each financing option will cost by checking current interest rates for each and considering the loan terms you desire. Take a look at some of our online calculators - starting with our refinance calculator. In addition, a Northwoods Bank Home Loan Center Lender is always ready to help you decide the best option for you. You'll want to consider:

• Which option is more affordable? Calculate how much each of these options will cost, including the effect on your monthly payments as well as up-front costs and fees, some of which may be assessed at closing. Make sure you can pay for the loan terms that you accept.
  
• What is the ultimate cost of the loan? A 30-year mortgage can spread out your mortgage payments and lower the monthly cost, but you could end up paying more interest over the life of the loan. In addition, don't forget to factor in the effects of the up-front costs and fees, some of which may be assessed at closing. Some homeowners would rather pay more principal off each month and build their equity at a faster rate, some would not.

As a homeowner, you're in an ideal position to use the growing equity in your home to finance home improvement projects. With home equity financing, you can convert the equity in your home to cash. Home equity financing, as opposed to cash-out refinancing, also lets you keep your existing mortgage intact.

Northwoods Bank of Minnesota offers two basic types of home equity products:

Home equity loan. This may be a smart choice for homeowners who know the exact cost of their remodel or need available funds at the beginning of the project. Northwoods Bank offers specialized home equity loans that allow homeowners to borrow against the value of qualified future improvements to their homes.

Home equity line of credit. This may be a smart choice for homeowners who don't know how much cash they'll need for their remodeling project or when they will need it. This is a good way to finance longer home improvement projects because it allows you to draw from a reusable source of cash. Our lines of credit have variable interest rates.

In order to decide which product type is best for you, ask yourself:

• How much will the improvement(s) cost? Obtain a figure - either as a fixed estimate or as a price range - from a reputable licensed contractor. If your project will be ongoing, or if it is difficult to obtain a firm total estimate, you may want the flexibility of a home equity line of credit.
  
• How much can you afford to pay for home improvement financing on top of your monthly mortgage payment? You want to be able to live with the terms you establish. A home equity loan offers fixed monthly payments. If you need this kind of certainty, you may want to opt for a home equity loan.

Home improvement loan. Northwoods Bank offers a special home equity loan for homeowners who do not have enough equity to cover the amount they want to borrow for future improvements. This product allows homeowners making qualified home improvements to borrow against up to 50% of the future value of the qualified home improvements in addition to the current appraised value of their homes, thereby increasing their financing ability.

Qualifying home improvements are:

• Room additions
• Kitchen/bath remodeling
• In-ground pool/spa addition
• Garage addition
• Deck addition
• Siding replacement or addition
• Window replacement

Homeowners must have a firm contractor's bid as evidence of their qualifying home improvement(s)' value.

Tax-Saving Home Improvement Loans

If you finance your remodel through a home equity loan or cash-out refinancing, you can usually benefit from tax-deductible interest.

Interest is fully deductible on:

• Up to $1 million in mortgages used to buy, build or improve your main home and a second home (up to $500,000 for married couples filing separately).
• Up to $100,000 more in home equity financing for your main home and a second home (up to $50,000 for married couples filing separately). Your loan-to-value ratio cannot exceed 100%.

Home equity and cash-out refinancing go beyond cutting your year-end taxes. Because these loans typically have lower interest rates than other forms of consumer credit, they can also lower your costs over the life of the loan.

We recommend that you talk with your tax advisor because there are deductibility limits and exceptions.