Home Equity Line of Credit FAQ

What is a Home Equity Line of Credit?

A Home Equity Line of Credit (HELOC) is a form of revolving credit in which a house serves as the collateral. These funds can be used for almost anything - education, home improvement, debt consolidation or your dream vacation. 

With a home equity line of credit, you are approved for a specific amount of credit, much like a credit card. First South Financial sets this amount by taking a percentage (up to 80%) of the home's appraised value and subtracting the balance owed on that mortgage.

For example (using 80% of the appraised value):

In determining the line of credit amount, First South will also look at income, debts and other financial obligations, along with credit history.

First South Financial's home equity line of credit has a period of 12 years in which you can borrow the money, aka the "draw period".  Although the draw period is 12 years, the repayment period is 20 years. This means that you pay off the amount you have borrowed over 20 years, not 12.

Does a HELOC have a fixed or variable rate?

The First South Financial Home Equity Line of Credit has a variable interest rate. The rate is based on the prime rate plus a margin depending on the Loan-to-Value (LTV) of the home. Although this has a variable rate, First South HELOCs do not have a floor rate. A floor rate is a rate the lender sets and that is the lowest rate for that loan. For example, a lender may advertise that the rate is Prime + 0% APR, but if they have a floor rate in place of 5.00% APR, the rate for the loan will never go below the floor rate. Our HELOCs are variable rate loans tied to Prime plus a margin. If Prime drops, then the rate on our HELOCs will drop as well.

Benefits of a First South Financial HELOC:

• Ongoing access to funds via First South debit card or provided checks
• No closing costs*
• No floor rate
• No initial draw required
• No transaction fee for each time you make a draw
• Long draw period of 12 years
• Long repayment period of 20 years

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*After the 6-month introductory period, the APR will revert to Prime, as listed in the Wall Street Journal, plus a margin of up to 2.00%. Maximum LTV is 90% and maximum APR is 18.00%. Rates may change quarterly based on rates published in the Wall Street Journal. After your loan is established and if you pay off and close your line of credit within 36 months of opening, you would be responsible for a recapture fee generally totaling between $300 and $3,000. The fee includes costs associated with originating your loan and may include, but not limited to, appraisal fee, credit report fee, flood certification, and title search. There may be an appraisal cost if the appraisal fee exceeds $500. Homeowners insurance is required, and flood insurance may be required. Excludes existing FSF HELOCs. Balances cannot be transferred from existing First South Financial loans or credit cards to a First South Financial HELOC. Loans are subject to approval criteria; not all applicants will qualify. Home Equity Line of Credit is available in TN, AR, and MS. Equal housing opportunity. All rates and offers are subject to change or withdrawal without notice. Please see First South Financial for complete details. NMLS# 410640

Equal Housing Lender. NMLS# 410640