What is a Bank of America HELOC?
If you need to come up with a sizable amount of cash in short order, then a Bank of America home equity line of credit may be the answer to your problem. This flexible type of loan can be used to pay any type of expense, from medical, dental or educational bills to home improvements or the purchase of a second home to a major car purchase or repair. Read on to find out how Bank of America processes the applications for these loans and the underwriting criteria that they use.
How Bank of America HELOCs Work
HELOCs offered by Bank of America are similar in most respects to HELOCs that are offered by any other bank, credit union or financial institution. The draw period can be for up to 10 years, and the repayment period is usually 20 years.
Users can access their lines of credit either by phone, in person at one of BOA’s financial centers, with a book of checks or with a Visa debit card. They can also sign into online banking and select the transfer tab.
Home equity lines of credit payments can be made online, by phone or via automatic debit or bill pay. Borrowers who are unable to make their payments for any reason need to contact Bank of America as soon as possible so they can make alternative arrangements.
Borrowers who need a higher credit limit on their HELOCs can reapply for a new HELOC and refinance their existing loan with no application fees, annual fees or closing costs and a new 10-year draw period (if approved). A higher loan payment will then be required during the draw period (minimum of $100) to pay both interest and principal on the loan.
Bank of America HELOCs come in two forms. A standard HELOC requires the borrower to make monthly payments throughout the repayment period. A balloon HELOC requires the borrower to pay off the entire balance outstanding at the end of the draw period in one lump sum.
Bank of America also offers a HELOC modification program for those who are unable to make their monthly payments. The program allows borrowers to modify their loan term, interest rate or monthly payment within certain limits. Borrowers who may be eligible must meet the following criteria:
- Your home equity account has been open for at least nine months
- You haven’t received home equity assistance once in the past 12 months, or twice in the past five years
- You’re experiencing a financial hardship, such as reduced income or divorce
- You’re able to repay the loan
If the borrower is unable to repay the loan, he or she can choose from the following options:
- Repayment plans of up to 12 months to help you catch up on past due payments
- Payment extensions of one to three months
How to Qualify & Requirements
Bank of America does not have a required minimum credit score that applicants must have in order to be considered, but they will look at key items on the borrower’s credit report such as bankruptcies or foreclosures. Borrowers who have major blemishes on their credit report or carry a great deal of debt may want to look elsewhere for a HELOC.
Bank of America’s debt-to-income ratio requirements are stricter than Chase’s or Citibank’s, so this should be considered as well. Bank of America also requires the same documentation as most other lenders when borrowers apply, such as W2s, pay stubs, tax returns, homeowner’s insurance certificates, etc.
Of course, the value of your home will ultimately determine the amount of money in the line of credit that you are approved for. Your home value is a critical piece of the puzzle in the underwriting process.
Typical Interest Rates
Bank of America is currently offering an introductory rate loan of 3.99% APY for the first year and then a variable rate that currently stands at 6.03% thereafter.
Those who qualify for this program cannot have already taken out another Bank of America HELOC. And those who qualify can reduce their rate even further under the following conditions:
- Automatic payment from a checking account (or savings account) discount of 0.25%
- Initial withdrawal discount of up to 1.50% (0.10% discount for each $10,000 loan amount withdrawn at the time an account is established)
- Preferred Rewards Client discount of up to 0.375%
Other rates may apply for Bank of America customers who have a few blemishes on their credit reports or from various other circumstances. Bank of America customers also have the option of moving some or all of their HELOC balance into a fixed-rate option in order to escape rising interest rates. Bank of America’s variable interest rates follow the Prime Rate that is published daily in The Wall Street Journal.
Pros & Cons
There are many possible benefits that can be had from taking out a HELOC with Bank of America. The money that the borrower receives from this type of loan can be used for absolutely anything, and the repayment terms are very reasonable. A HELOC can help get borrowers out from under high-interest credit card balances or personal loans and consolidate their debts into one manageable monthly payment.
Another benefit that a home equity line of credit can provide is that there are no closing costs, unlike what would be the case with a cash-out refinance or home sale. HELOCs have their underwriting requirements that must be met, but they are generally one of the easiest types of loans to apply for.
One drawback that Trump’s new tax laws have created for HELOCs is that the interest on the amounts that are withdrawn is no longer tax deductible. The only exception to this is if the HELOC proceeds are used to buy, build or improve the residence against which the loan is taken.
Probably the biggest disadvantage that comes with HELOCs happens when the borrower is unable to make the monthly payments. When this happens, Bank of America can foreclose on the house in order to get its money back, and the borrower will lose their home.
A third party rating company recently evaluated the application process and customer service quality of Bank of America’s credit line department. It concluded that trying to get to Bank of America’s HELOC division on the phone was very frustrating and time consuming, but the online application process was very straightforward and offered live chat for those who need assistance.
But their phone system is among the worst in the industry, with the computer losing their input data twice before they were finally able to get hold of a customer service representative in the HELOC department.
And this person was not very eager to answer their questions without them having filled out an application. Another strike against BOA was that they no longer offer home equity loans. However, BOA’s loan-to-value requirements are a bit less stringent than they are with most other lenders.