What is a PNC Home Equity Line of Credit?
This type of flexible loan allows you to draw against the equity that you’ve accumulated in your primary or secondary home and convert it into cash. You can use your line of credit in lieu of a second mortgage to pay for medical, educational, dental or automotive expenses and student loans or to build, buy or make improvements on your home. Read on to find out more about this line of credit and how it can benefit you.
How PNC Home Equity Lines of Credit Work
PNC Bank home equity lines of credit work in much the same fashion as HELOCs issued by other banks, credit unions and private lenders. The borrower pledges a portion of the equity in their home against the line of credit. In return, the borrower is allowed to draw on the line of credit to pay for anything that he or she wants or needs up to the credit limit.
Borrowers have several different ways available to access their cash. They can use the book of checks that was issued to them at closing, or they can request money online or by phone or they can use their Visa® Choice Access Card. Their funds will be available on the fourth business day after closing in order to satisfy the 3-day right of rescission accorded to the borrower.
Unlike home equity loans, home equity lines of credit have a lifespan that is divided into two periods. The first period, known as the draw period, is the period of time during which the borrower can draw funds using the line of credit. The second period is the repayment period, when the borrower must repay the outstanding balance of all funds that were withdrawn. The standard terms for these periods are 10 years for the draw period and 20 years for the repayment period.
Borrowers also have two choices when it comes to making payments. They can opt for an interest-only payment that will increase after the draw period ends, or they can choose to start with an interest and principal payment that will not increase at the end of the draw period.
The maximum allowable loan-to-value ratio at PNC Bank is 89.9%. For some HELOCs, the maximum LTV allowed is less than that. There are also several different types of property that can be used for a home equity line of credit. PNC Bank accepts single family primary residences, 1-2 family homes, vacation homes, condos and townhouses.
Following is a breakdown of the servicing fees charged by PNC Bank on its HELOCs:
- Cash Advance Fee – $0
- Late Charge – The greater of $40 or 10% of the total amount of the payment
- Return Payment Fee – $30
- Stop Payment Fee – $20
- Return Credit Line Check Fee – $30
- Over limit Fee – $30
- Fixed Rate Transfer Fee – $100
- Annual Fee: $50 (waived with a PNC Performance Select Checking Account)
There are no closing costs or application fees for a PNC Bank HELOC.
Qualification & Requirements for a PNC HELOC
The Application Process
When you apply for a HELOC with PNC Bank, there are several documents that you should have on hand in order to process your application. They include:
Personal Information (Full name, Social Security number, Date of Birth, employment status, income)
• Contact Information (phone, email)
• Property Information (address, property type, estimated property value)
• Requested Loan Amount
Once PNC Bank has this information, it will run a report of your credit history in order to analyze your ability to pay your bills. Approval for the HELOC will depend in part on what the bank finds there. Generally the borrower will need to have good credit in order to be approved.
Some or all of these documents may be needed to process your HELOC application. They include:
- Tax statements
- Copies of pay stubs
- Financial statements (bank and asset)
- Information on additional properties you may own
- Last 2 pay stubs and last 2 years of W2s
- Last 2 years of tax returns
- Personal financial statement (for loans greater than $250,000)
- Social Security Income Award Letter
- Pension award letter
- Most recent investment account statements
- Lease agreement for each rental property owned
- Homeowner’s insurance declarations page
- Most recent mortgage statement
- Title insurance policy from most recent mortgage (for loans of $500,000 or greater)
- Flood insurance declaration (if property is in a flood zone)
- Master insurance policy for condominium association (if property is a condo)
- Trust agreement
- Power of attorney
- Payoff statements
Once PNC has all of the documentation that they need, they will analyze the borrower’s credit and employment history as well as your income and expenses such as mortgage payments to determine whether they can issue the borrower a HELOC rate loan.
If the loan is approved, then PNC Bank will notify the borrower and also outline any details that need to be taken care of at the closing. Then they will set the closing date and confirm the amount that is to become available. (There is no lump-sum dispersion of funds for a HELOC.) At the closing table, the borrower must produce two forms of ID, one of which must be a valid picture ID.
Typical Interest Rates
Like many lenders, PNC Bank does not have a “set” rate of interest that they charge their HELOC customers. Although it will be a variable rate that rises and falls with prevailing interest rates such as the prime rate, the exact rate will depend on your credit score and history, the value of your home and the LTV ratio.
Borrowers who set up automatic payments from a PNC Bank checking account are accorded a discount on their interest rate.
Borrowers also have the option to convert some or all of their outstanding HELOC balance into a fixed rate option. This can protect the borrower from rising interest rates.
Pros & Cons
As mentioned previously, the biggest advantage to getting a HELOC from PNC is the rate of interest that you’ll be charged in contrast with other lenders such as credit cards and personal loans. And the interest may be tax-deductible if the HELOC proceeds are used to build, buy or make improvements on the property against which the line is drawn.
Of course, the main disadvantage of a HELOC is that if the borrower becomes unable to make the monthly payment, then the bank can foreclose on the property. If the property is a primary residence, then the borrower will be effectively left homeless. Borrowers should therefore do a cash flow analysis before applying in order to ensure that they can afford to make this additional payment.