PenFed Credit Union: 2023 Home Equity Review

Methodology

To create our Bankrate Scores, we evaluated lenders based on availability, affordability and borrower experience. Availability was assessed based on the minimum loan amount required, time to approval, days to close, minimum draw requirements, minimum credit score requirements and loan types offered. Affordability was assessed based on minimum APR, discounts and promotions offered and associated fees. Borrower experience was assessed based on online application and account availability, customer support, auto payment availability and mobile app availability and ratings.

Benefits

• With a PenFed HELOC, you can lock in a fixed APR on some or all of your balance (with a minimum of $10,000) during the draw period.
• The maximum loan amount and combined loan-to-value (CLTV) ratio can vary by loan, but you’ll have the flexibility to borrow as little as $25,000 or as much as $1 million with CLTV ratios as high as 70 percent. (For CLTV ratios of 85.01 percent to 90 percent, the maximum is $500,000.)

Drawbacks

• Unlike banks and other lenders, credit unions require you to join as a member before being eligible for a loan (or in this case, a HELOC). While it’s possible for anyone to join PenFed, it’s an extra complication that could be a deal-breaker for some.
• PenFed covers most of the closing costs on its HELOCs, but if you close your account within three years, you’ll be required to reimburse the lender for the closing costs it paid on your behalf.

Types of fees charged

PenFed doesn’t charge any lender fees at closing for its HELOCs. However, you might be on the hook for taxes, notary fees and an appraisal fee if required, and you’ll have to reimburse closing costs if you pay off or close your loan within 36 months of opening the line of credit. You’ll also be charged a $99 annual fee, but this can be waived if you pay $99 in interest within the preceding 12-month period.

Other regular fees to be aware of are a returned check fee of $20, a late fee of 5 percent and an over credit limit fee of $10.

Home equity loan products offered

PenFed’s home equity lines of credit range from $25,000 to $1 million and include a 10-year draw period followed by a 20-year repayment period. There are, however, some limitations. For example, if your CLTV ratio is greater than 70 percent and you occupy the home, the maximum loan amount is $500,000. If you don’t occupy the home, you can borrow between $25,000 and $500,000 with a CLTV ratio limit of 80 percent.

PenFed’s HELOCs can also be converted to a fixed-rate option, allowing you to freeze some or all of your HELOC balance at a fixed interest rate, with a minimum of $10,000 per fixed-rate advance. You can have three separate fixed-rate advances open at a time, with a maximum of two new advances per year. The repayment terms for these advances is 20 years.

How to qualify for a HELOC with PenFed Credit Union

For a HELOC, PenFed requires a minimum credit score of 660 and a debt-to-income (DTI) ratio of no more than 50 percent. PenFed also requires proof of income, at least one year of W-2s, at least two months’ of your most recent bank account statements and a mortgage statement for all properties owned. You might also need to provide documentation for current debts and self-employment income. Remember that you do need to be a member of the credit union to receive funds.

How to get started

You can start the application process with PenFed online, including applying for membership. To become a member, you’ll need to maintain a $5 savings account with the credit union.

Alternatively, you can request a call from a loan officer. For any questions during the application process, you can call customer service at 800-970-7766, Monday through Friday from 7 a.m. to 11 p.m. ET, Saturday from 8 a.m. to 11 p.m. ET or Sunday from 9 a.m. to 5:30 p.m. ET, or send a secure message online.