What is a TD Bank HELOC?
If you need to get your hands on a large sum of cash quickly, then a home equity line of credit from TD Bank could allow you to do just that. These versatile lines of credit can be used for absolutely anything, from medical and dental expenses to college tuition to buying or repairing a car. They can also be used to renovate your current home or investment property. Read on to find out more about TD Bank HELOCs and how they can work for you.
How TD Bank HELOCs Work
TD Bank home equity lines of credit work in basically the same way as all other HELOCs offered by banks, credit unions and other financial institutions. Unlike home equity loans, the borrower applies for a line of credit that is secured by the equity in his or her home or investment property, and once the loan is approved, the borrower can then draw on the line of credit up to the maximum limit specified in the closing documents. Home equity loans simply disperse the entire amount up front to the borrower in one lump sum.
Another way that HELOCs differ from home equity loans is that there are two key time spans in the life of a HELOC. One is the draw period, where the borrower can draw on the funds in the HELOC and spend the cash. The other period is the repayment period, where the borrower must start repaying the outstanding HELOC loan amount. The draw period and the repayment period can vary with TD Bank according to the terms of the loan, but the standard periods of time are 10 years for the draw period and 20 years for the repayment period.
TD Bank HELOCs have a maximum combined (with the first mortgage) loan-to-value ratio of 89.9%. Borrowers can access their HELOCs either by using checks, visiting a TD Bank location and asking for funds in person, online or by using their Visa® EquityAccess debit card. And borrowers can draw only the funds they need; there is no minimum draw requirement.
Qualification & Requirements for a TD Bank HELOC
Borrowers who apply for a HELOC with TD Bank must first answer some questions about their income and expenses and any properties that they own. Then they will be expected to produce the following documentation to submit with their applications:
If you are a salaried employee:
- Pay stubs – copies of your most recent pay stubs (past 30 days)
- W-2 forms – copies for the past 2 years
- Work history – explanation of employment gaps of 1 month or more
If you are self-employed:
- Tax returns – copies of signed personal and business tax returns from the past 2 years for each business, including schedules and attachments and Profit and Loss balance sheets
- Other sources of income (i.e. rent, royalties, residual income, commissions)
If applicable, they will also need:
- Documentation from additional sources of income (e.g., Social Security Awards Letter, leases and recent tax returns for rental income)
They may also request:
- A Tax assessment
- A Trust agreement – if applicable
- The borrower’s most recent Mortgage statement – if applicable, statements and/or escrow analysis statements
TD Bank will mail the borrower a loan estimate within 3 business days of receiving the application. They will contact the borrower if they need any additional documentation. Then they will schedule a time to make an appraisal of the borrower’s property, which may include an interior inspection.
Documentation required for loan closing
The following documents will be required at your closing (or sooner):
- Your photo identification – driver’s license, state picture ID, U.S. military ID or U.S. passport are acceptable
- Payoffs – if you’ll be using your line of credit to pay off bills or debt, you need to provide the amount, payee name, billing address and account numbers
- An evaluation of your property – if an interior evaluation is also needed, your lending specialist will contact you to discuss the best time the appraiser or broker can reach you to set up an appointment
- Insurance – proof of homeowners insurance
- Flood insurance (if needed)
Typical Interest Rates
For HELOCs that charge an origination fee of $99 and an annual fee of $50, the initial teaser rates for HELOCs ranging in value from $50,000 to $99,999 can be as low as the prime rate plus 0.24%, while the rates for HELOCs from $100,000 and up are prime minus 0.61%. When the introductory period ends, then the rates for smaller HELOCs can be as low as 5.74%, or 4.89% for larger rate loans. For loans that don’t charge any fees, the rate can be as low as prime plus 1.99% during the introductory period, then changes to 7.49% thereafter.
Investment property HELOCs generally charge prime plus 1.74% during the introductory period, and then change to 7.24% thereafter. This applies to HELOCs ranging in value from $25,000 to $500,000.
The interest rates that TD Bank charges on its HELOCs vary by state and zip code, but are generally between 5.74 and 7.49%. Borrowers can get an additional 0.25% knocked off of their rate if they set up an automatic payment from a TD Bank personal checking account or savings account. Borrowers can also transfer some or all of their outstanding HELOC balance into a fixed account in order to protect themselves from rising interest rates.
TD Bank’s fixed and variable rates are very competitive, although they vary from one jurisdiction to another. Rates are also partly determined by the borrower’s credit score and credit history, the loan-to-value ratio of the property and the value of the home against which the line of credit is being drawn.
Pros & Cons
There are many benefits to using a TD Bank home equity line of credit. This type of loan can be used for absolutely anything, from healthcare bills to automotive expenses to college tuition, or even to purchase a second home. And if the HELOC is used to build, buy or make improvements on the home against which the HELOC is drawn, then the interest charged is tax-deductible.
HELOCs also usually charge lower rates of interest than most other types of loans on their outstanding balances, such as credit cards or personal loans. This makes them ideal vehicles for debt consolidation or paying off another large debt with a higher interest rate.
The biggest drawback to these credit lines is that if the borrower becomes unable to make the monthly payments on the loan, then TD Bank can foreclose on the property. This is true with any lender. Borrowers therefore need to think carefully when applying for one of these loans so that they don’t end up with more bills at the end of the month than money.