What is a SunTrust Home Equity Loan?
If you need a large sum of cash for a single upcoming expense, such as a medical or dental bill or automotive repairs or replacement, then a home equity loan from SunTrust bank (member FDIC) may be just what you need. Although they differ from a home equity line of credit, these fixed-rate loans can still provide you with quick cash that you can use to pay for any type of expense. Read on to find out how SunTrust home equity loans work and what they can do for you.
How SunTrust Home Equity Loans Work
SunTrust home equity loans are similar to all other home equity loans that are offered by banks, credit unions and other financial institutions. They differ from home equity lines of credit, which charge variable interest rates and have both a draw period and a repayment period.
Home equity loans do not have a draw period; the entire term of the loan could be considered to be the repayment period. Home equity loans usually have loan terms ranging from 5 to 30 years. They are fixed-rate home loans that have a set interest rate and monthly payment.
Each payment goes to both interest and principal, and the borrower begins paying interest on the entire loan amount with the first payment because the entire loan balance is dispersed up front as a lump sum.
The amount of the home equity loan that is granted is dependent upon several factors. The value of the borrower’s home is one of the most important factors, along with the loan-to-value ratio used by the lender.
Most lenders will allow loan-to-value ratios of 80 to 85 percent, although some lenders go as low as 70% under certain circumstances. Meanwhile, other lenders may go as high as 90 to 100 percent.
The actual loan amount is computed by multiplying the home value by the loan-to-value ratio and then subtracting the amount of the primary mortgage along with any other liens on the property. The remainder is the maximum amount that the lender will likely grant to the borrower.
It should be noted that SunTrust currently does not offer home equity loans.
Qualification & Requirements for a SunTrust Home Equity Loan
The process of getting a home equity loan is essentially the same as getting a first loan, which is why they are often referred to as second mortgages. The borrower begins by filling out an application from the lender.
This can usually be done either online, in person at a branch location of the lender, on the phone or via the lender’s mobile app. Then the borrower must gather most or all of the following information for the lender to consider during the underwriting process:
- Personal and contact information (Name, Social Security number, address, email, etc.)
- List of monthly debts and obligations
- Employment history, usually going back for at least 2 years
- Last 30 days of pay stubs
- Last two years’ worth of W2 forms
- Last two years of income tax returns with K-1 forms (for self-employed borrowers)
- Complete list of liquid assets (bank accounts, brokerage and investment accounts, retirement plans and accounts)
- Statement of Social Security benefits, statement of benefits for any other retirement plan or account
- Complete list of other real estate holdings, such as vacation homes, condos, rental properties, etc. along with mortgage balances
- Other assorted documents as needed (Trust documents, divorce decrees, child support and alimony income statements, etc.)
Once the lender has all of this documentation, it will pull the borrower’s credit report and get their credit score. They will also order an appraisal in most cases, and then an inspection if the appraisal uncovers any major issues. An interior appraisal is also required in some instances.
Finally, the lender will either approve or reject the loan application. If it is approved, then the lender will contact the borrower to schedule a time for the closing.
The borrower must bring a valid form of picture ID and sign all of the loan documents at the closing, and then the borrower has the chance to cancel the transaction during the 3-day right of rescission that comes immediately after closing. The funds will be dispersed either at the time of closing or after the 3 day period has passed.
Typical Interest Rates
Suntrust home equity loan rates do not exist, seeing as home equity loans are not offered by them, so here is a general breakdown of how these rates typically look.
The interest rate charged by most home equity loans is usually slightly higher than the rate charged by first mortgages, and it is usually linked to a major financial index like the Prime Rate, which is published daily in The Wall Street Journal.
But the exact rate that is charged on a per-loan basis will vary according to several factors, such as the size of the loan, the loan-to-value ratio, the borrower’s credit score and history and the borrower’s debt-to-income ratio.
In most cases, borrowers can qualify for a rate discount by opening a checking account with the lender and setting up an automatic payment plan. But those with good credit will always get better deals than those with spotty credit.
Pros & Cons
Home equity loans can provide many benefits to members. One of the chief advantages they have is their flexibility. Borrowers can use the proceeds from the loan to use in any manner that they choose; there are no restrictions. And if the loan proceeds are used for home improvements, then the interest is tax-deductible as long as the borrower is able to itemize deductions on their income tax return.
Unlike with first mortgages, the lender will usually pay some or all of the closing costs associated with a home equity loan. But borrowers are often required to pay any appraisal or notary fees. But home equity loans are still usually much cheaper than a cash-out refinance.
Another major advantage of home equity loans is that the rates that they charge are usually much lower than the rates charged by other forms of debt, such as high interest credit cards, auto loans, student loans or personal loans. This makes them excellent vehicles for debt consolidation.
The fixed rates that home equity loans charge can be either an advantage or disadvantage, depending upon several factors. If interest rates are rising, then borrowers can lock in a fixed interest rate with a home equity loan and protect themselves from possibly having to make larger payments later on.
- But if interest rates are falling, then borrower can run the risk of being locked into a higher rate when variable rate home loans are charging a lower interest rate.
Of course, the biggest disadvantage of home equity loans is that if the borrower becomes unable to make the monthly payment, then the lender has the right to foreclose on the property, thus rendering the borrower effectively homeless.
- For this reason, borrowers are always strongly encouraged to make certain that they will be able to make this additional payment consistently before signing on the dotted line.