What is a SunTrust HELOC?
When unexpected (or even expected) expenses arise, many homeowners will turn to a home equity line of credit as a source of quick funding. These versatile home loans allow homeowners to tap into the equity in their homes and convert it into cash quickly. If you find yourself in dire financial straits, then a home equity line of credit from SunTrust may be just what you need to solve your problem. Read on to find out how SunTrust Banks, Inc.’s HELOCs work and how they can benefit you.
How SunTrust Bank HELOCs Work
SunTrust’s HELOCs are similar in most respects to HELOCs from other mortgage lenders such as banks, credit unions, private lenders and other financial services firms. HELOCs have a lifespan that is divided into two time periods.
The draw period is the period in which the borrower can draw on the line of credit, and with SunTrust Bank, this period lasts for 10 years. During this period, the borrower often has the option of making either interest-only payments on the amount that has been withdrawn or principal and interest payments.
HELOCs are distinct from home equity loans in that they do not disperse the entire amount of the HELOC credit limit up front in cash. Borrowers can draw on their HELOCs as they need to, and they only pay interest on the amounts that have been withdrawn.
The next period is the repayment period, where the borrower starts to repay the principal amount that was withdrawn from the credit line during the draw period. If the borrower made interest-only payments, then the amount of the payment will increase when the repayment period begins.
No further funds can be withdrawn from the HELOC during the repayment period. And some lenders require the borrower to repay the outstanding balance on the HELOC in one lump sum at the end of the draw period.
SunTrust customers can access the equity in their lines of credit in several different ways. They can use Variable Rate checks, online banking, mobile banking or they can visit a SunTrust branch location in person.
Most HELOC lenders have a maximum loan-to-value ratio that they use when they compute the amount of the borrower’s HELOC. This ratio is usually 80 to 85 percent, although there are lenders who will go as high as 90 or even 100 percent, depending on various circumstances.
Lenders compute the amount of credit by dividing the maximum LTV ratio that they allow by the value of the property in question, then subtracting the value of any primary mortgages or other liens on the property. The remaining amount is generally what lenders are willing to lend out.
Qualification & Requirements for a SunTrust Bank HELOC
Borrowers who apply for a home equity line of credit are usually required to go through the exact same underwriting process as they did with their primary mortgages. First, SunTrust will ask the borrower to fill out an application either online, by phone or at one of their branch locations and then provide a list of documents for their examination. Applicants will need to have the following information:
- Personal and contact information
- Co-applicant information for joint applications
- Address history
- Employment information
- Statements for all sources of income (Social Security, retirement income, pensions, etc.)
- Financial information (list of assets and liabilities)
- Collateral information (SunTrust will accept a primary or secondary home for collateral)
SunTrust will also pull the HELOC borrower’s credit report and look at their credit score. Once SunTrust has all of the documentation that they need, they will contact the borrower to determine the next step.
SunTrust will order an appraisal for the home, which may require the appraiser to conduct an inspection of the inside of the home. They will also verify that the title deed to the property is valid.
Once these matters have been taken care of, SunTrust will schedule a date and time for the closing procedure. The borrower must appear and sign all of the necessary documentation and also produce a valid picture ID.
The HELOC funds will become available on the fourth business day after the closing. The first three days are the buyers’ right to rescission under current law, where the buyer can cancel the transaction if they want to.
Typical Interest Rates
Like all other home equity lines of credit, SunTrust’s HELOC rates look like this:
They charge a variable rate of interest that is tied to the prime rate. This is a major financial index that is published daily in The Wall Street Journal.
SunTrust is currently offering a promotional rate of interest of 4.24% for the first year of the draw period for qualified applicants who make an initial withdrawal of at least $25,000. Then the rate will rise to anywhere from 5.25% to 6.47%. A 0.25% discount is available to current SunTrust customers who elect to make automatic payments out of a SunTrust checking account.
The long-term rate ranges from prime minus 0.25% to prime plus 0.97%. Borrowers also have the option of moving some or all of their outstanding HELOC balances into a fixed interest rate option in order to protect themselves from rising interest rates.
Pros & Cons
The biggest advantage that a SunTrust home equity line of credit offers is the ability for borrowers to quickly pay off debts or expenses as they arise. Borrowers can use their funds to pay medical or dental bills, education-related expenses, automotive expenses or home improvements. And those who use their HELOCs to build, buy or make improvements on the property that is being used as collateral for the line of credit can usually deduct the interest that is charged on the loan.
Another major advantage of HELOCs is that they usually charge much lower rates than credit cards, car loans or personal loans. This makes them an ideal way to consolidate debt. And getting a HELOC is usually less complicated than doing a cash-out refinance.
One drawback of HELOCs is their adjustable interest rates, which can rise when the prime rate rises. This means that the payments can increase over time, and the interest rate can rise as high as 18%. However, they usually don’t have any closing costs or application fees, as long as the HELOC is kept open for at least three years.
Perhaps the main disadvantage of HELOCs comes when the borrower becomes unable to make the monthly payments on the loan. If that happens, the SunTrust can foreclose on the home, leaving the borrower homeless. Borrowers therefore need to carefully analyze their finances in order to determine that they will have enough money to make an additional payment.