With mortgage rates barely budging, it doesn’t make sense for a lot of homeowners to refinance and replace their low-rate mortgages. To access cash, home equity lines of credit often make more sense right now. Now, a major national lender is entering the HELOC arena after years of sitting on the sidelines.
Chase Home Lending has rolled out a new HELOC product. The bank exited the second mortgage market five years ago during the pandemic. It began a limited rollout of HELOCs earlier this year, but is now launching a line of credit for equity access nationwide, except in Texas.
HELOCs are a home equity borrowing solution. When rates were falling, a more popular tool for tapping home equity was the cash-out refinance. Now that so many homeowners have a primary mortgage rate lower than prevailing market rates, a refinance is not an appealing option.
“As home valuations reach historic highs, homeowners are looking for more options to tap into their home’s equity. We’re proud to offer customers the ability to secure a HELOC through Chase,” Erik Schmitt, digital channel executive at Chase, said in a release.
Dig deeper: Is now a good time to take out a HELOC?
The Chase HELOC will allow borrowers to access up to 80% of their home's value. However, customers have to tap most of their line of credit (85%) as a lump sum. The rest of the available line can be drawn over the next three years.
While that may be exactly what borrowers who prefer cash-out refinancing may be looking for, it limits the usual on-demand flexibility of a HELOC. Taking smaller, up-front draws from a line of credit allows you to pay less interest over the years.
Some lenders don't require a minimum draw, so if you don't need such a large initial cash amount, shop for a HELOC lender without the lump-sum stipulation.
While Chase hasn't announced any introductory rate offers, many providers allow borrowers to lock in a below-market rate for six months to one year before the adjustable rate begins. This is another good reason to shop HELOC lenders for the best offers.
Learn more: How does a HELOC draw period work?
The new Chase HELOC allows interest-only payments for the first 10 years. Following the interest-only period, there is a 20-year repayment term when you’ll make payments toward both interest and the principal. Credit lines are available from $25,000 to $400,000.
Chase will also be rolling out a new HELOC calculator where potential borrowers can enter their home address and receive an estimate of fees and the monthly payment.
