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FREQUENTLY ASKED QUESTIONS
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- General Information
- Improve Your Home
- Consolidate Your Debt
- Pay for Major Expenses
- What to Expect
- 1. What is a home equity loan?
- 2. What is the difference between a home equity loan and a home equity line of credit?
- 3. What are the basic guidelines for getting a Discover Home Equity loan?
- 4. How do I figure out how much I can borrow?
- 5. How can I figure out how much equity I have?
- 6. How can I estimate my home's market value?
- 7. What are the benefits of a home equity loan?
- 8. What else should I consider when obtaining a loan against the equity in my home?
- 9. What hours is my Personal Banker available?
1. What is a home equity loan?
A home equity loan (HEL) lets you borrow a fixed amount, secured by the equity in your home, and receive your money in one lump sum. Typically, home equity loans have a fixed interest rate, fixed term and fixed monthly payment. Interest on home equity loan may be tax deductible under certain circumstances. Please consult your tax advisor to see if you qualify.?
2. What is the difference between a home equity loan and a home equity line of credit?
With a home equity line of credit (HELOC), you withdraw money as you need it up to a predetermined limit and repay the loan over a fixed term and typically with a variable interest rate that may increase over time. There is usually a fixed "draw" period, during which funds continue to become available for withdrawal as the balance is paid down, followed by a fixed repayment term. During the draw period, making interest-only payments is usually allowed.
3. What are the basic guidelines for getting a Discover Home Equity loan?
Talking with one of our Personal Bankers is the best way to get an initial idea of your eligibility, but here are a few things we look for:
- Credit score of at least 620
- History of responsible credit use
- Verifiable employment and income
- Sufficient equity in your home
4. How do I figure out how much I can borrow?
Your borrowing ability is determined by the equity you have in your home as well as other factors such as credit history. Use our?Loan Amount Calculator?to see how much you can qualify for.
5. How can I figure out how much equity I have?
You can get a rough estimate of your available equity by subtracting all the debts secured by your home (i.e., your mortgage and any other home equity loans) from your home's estimated market value. For example, if the market value of your home is $300,000 and you owe $100,000, you have $200,000 in home equity.
6. How can I estimate my home's market value?
You can get an estimate of your home's market value by reviewing recent sale prices of similar homes in your area. There are also helpful websites, such as zilllow.com and eppraisal.com, which provide estimates of home values.
7. What are the benefits of a home equity loan?
Benefits of a Discover Home Equity loan may include lower interest rates and potential tax savings. Since a home equity loan is a secured debt, the average interest rate is typically lower than what you'll pay on an average credit card or other form of unsecured debt. Home equity loans also offer potential tax savings as interest payments may be tax deductible depending on how you use the loan. Consult your tax advisor as to the deductibility of your interest.
8. What else should I consider when obtaining a loan against the equity in my home?
Be careful when obtaining a home equity loan to pay for short-term expenses. While the interest rate may be lower than rate of your current loan/debt, it is possible you will be paying back the loan over a longer period of time, which may result in paying more interest. Another concern is incurring new debt after using a home equity loan to pay down existing debt.
9. What hours is my Personal Banker available?
Your Personal Banker is available from 8am to Midnight ET.
- 1. Is this project to improve my home for my enjoyment or because I plan to sell?
- 2. What do I need vs. what do I want?
- 3. How do I figure out what my home improvement project will cost?
- 4. How do I know if I'm paying too much (or too little!) for home improvements?
- 5. All the competitive bids I've gotten for my home improvement project are too high. What do I do?
- 6. What are my responsibilities when I hire a contractor to do my home improvements?
- 7. How could my home improvement project affect my homeowner's insurance?
- 8. I'm remodeling my kitchen and there are so many choices! How do I know which ones are right for me?
- 9. Will I need to obtain a building permit before I begin my home improvement project?
- 10. I've been hearing a lot about "green building"—using more sustainable, renewable materials and conserving energy. Is it worth it for me to go green with my home improvement projects?
- 11. Are there any industry standards or certifications I should look for when hiring someone to do home improvements?
- 12. I live in a townhouse development. Is there anything special I need to do before starting my home improvement project?
1. Is this project to improve my home for my enjoyment or because I plan to sell?
If you intend to stay in your home for a while, tackle projects that are within your budget and will bring the greatest day-to-day satisfaction to you and your family. This is the perfect opportunity to customize your house and create the home you've always wanted.
If you're looking to sell in the next couple years, the projects you choose should help your home stand out from others on the market without over-improving it compared to your community. Learn more about the types of projects that can have the greatest impact on your?home's resale value.
2. What do I need vs. what do I want?
Start by making a list of the essentials: replacing a leaking roof, repairing foundation cracks or adding living space for your in-laws are projects that probably can't wait. Now, make a list—in priority order—of everything you'd wish for in your home. Get estimates on completing the essential projects and the first 3-5 items on your wish list. Once you know?how much loan you can afford, see if there's money left over after you've handled the essentials. Then, you can add items from your wish list up to your total loan amount—for a home you can live in and live with.
3. How do I figure out what my home improvement project will cost?
Write down specifically what you want to accomplish. "Remodel the kitchen" is too general; itemize instead, e.g.,
- Install granite countertops
- Replace all cabinets
- Buy new refrigerator, dishwasher, stove
Once you get a clearer idea of everything that's involved, decide if you can complete the project yourself or if you'll need a contractor. If choosing a contractor, ask for a written construction schedule and an estimate covering labor, materials, insurance and any cost overruns if the schedule isn't met.
See how?much you could qualify for?to find out if your loan can cover the cost of your project. If not, review the scope of and materials for your project to see where you can economize or what you can postpone.
4. How do I know if I'm paying too much (or too little!) for home improvements?
Before you begin any?home improvement?project, make a detailed list of everything you want to accomplish and be very specific about the brands and types of products you prefer. Prices vary widely based on the quality of your materials and appliances, so be sure you've set yourself up to get an apples-to-apples comparison.
If you plan to hire a contractor, get competitive bids from at least three sources and be sure they factor in the behind-the-scenes costs for additional infrastructure work. Bids also should distinguish between the cost of materials and their related labor costs.
Compare bids.?If anything sticks out as being significantly over— or under—bid, ask the contractors to explain why: one may be a painstaking perfectionist who'll pour more hours than really needed into a project, while another may try to convince you that taking a few short-cuts will save you a lot of money. Beware of both! You don't need a "Michelangelo" to design your family room addition, and you definitely don't want a "low-ball" contractor who'll make potentially dangerous compromises just to get your business.
If you still don't feel like you're getting the straight story,?show your bids to the experts at your local hardware or home improvement store. Once they understand you're asking for clarity and not for them to come up with an additional competitive bid, you'll be able to get the objective answers you need to confidently decide how much is too much, too little—or just right.
5. All the competitive bids I've gotten for my home improvement project are too high. What do I do?
It's hard to walk away from remodeling projects you have your heart set on doing, but when all bids exceed your budget and you have to decide what stays and what goes, take a look at the most expensive items on your list and?evaluate whether they'll give you the emotional and financial "bang for your buck" you expect.
For example, each bid may have priced installation of a wood-burning, three-sided fireplace at more than $10,000. Ask yourself:
- Will my family and I get $10,000?worth of enjoyment?from this fireplace?
- Will I be able to?recoup the cost?of this investment when I sell my home?
If you can honestly answer "yes" to each of these questions, you probably should keep this project and trim costs elsewhere. If not, then omit this pricey project—or?consider less expensive alternatives that can help you achieve the same goals.?If all you really want is a glow to add atmosphere to a room but don't really need the heat or the hassle, take a look at a wall-mounted electric fireplace that uses low-cost LED lighting to create the illusion of flames and may cost less than 1/10th?the price.
6. What are my responsibilities when I hire a contractor to do my home improvements?
Want to do your part as a homeowner to keep your?home improvementproject running smoothly? Get a rundown on your roles and responsibilities with the?Five "Be's"?of home improvement:?Be Thorough, Be Specific, Be Considerate, Be Observant and Be Appreciative.?Learn how these "Be's" can help ensure your success.
7. How could my home improvement project affect my homeowner's insurance?
Consult your insurance agent to see if your policy needs to be revised or riders need to be attached because of your improvements. It's quite possible you'll see an increase in your premium—not only because?you've added value and made your home worth more,?but also because you need full replacement coverage for all the new appliances, furnishings and upgrades you've installed.
8. I'm remodeling my kitchen and there are so many choices! How do I know which ones are right for me?
Kitchens are often called the "heart of the home,"?so make sure your kitchen reflects you, your values and the things you love.?The best rule of thumb is:?how?you intend to use your kitchen should determine what you put in it.?Learn how to evaluate your choices to create your perfect kitchen
9. Will I need to obtain a building permit before I begin my home improvement project?
In all likelihood, yes. While the types of projects that require a permit can vary from one town to another,?it's always a smart idea to check with your local building or planning department?before making any home improvements. Not only will this help ensure every aspect of your project complies with the legal codes for building materials and construction techniques, it can also spare you potentially staggering fines and rebuilding costs when illegal work is discovered by building inspectors, home appraisers and future home buyers.
The actual cost of your permit will be determined by your municipality but it's generally based on:
- the size and complexity of your project
- the value of the work you are doing
- additional permits required for your project
- how long it takes your local building department to review your application and plans
- inspection fees
10. I've been hearing a lot about "green building"—using more sustainable, renewable materials and conserving energy. Is it worth it for me to go green with my home improvement projects?
Green technologies—once considered on the fringes of home building and remodeling—have gotten easier and more mainstream in recent years. Nowadays, home improvement projects that include more sustainable, renewable materials are rewarding homeowners with improved energy efficiency and lower maintenance costs.?Learn more to decide if "green" is the way you want to go.
11. Are there any industry standards or certifications I should look for when hiring someone to do home improvements?
In addition to checking out your contractor's ratings, reviews and credentials (including licenses and insurance) through the Better Business Bureau and your local Chamber of Commerce, ask if they've earned a Certified Graduate Remodeler (CGR) or a Graduate Master Remodeler (GMR) designation from the National Association of Home Builders (NAHB).?These commendations reflect a professional remodeler's ongoing commitment to advanced training,?continuing education and the highest ethical standards. Also find out if he or she belongs to a local NAHB Remodelers Council, which represents more than 24,000 remodeling industry members.1
12. I live in a townhouse development. Is there anything special I need to do before starting my home improvement project?
If you live in a common interest housing development like a townhome,?your homeowners' association governing documents dictate what you can and can't do to your home.?These documents were undoubtedly given to you when you bought your home, and periodic revisions are required to be sent to all owners.
Their intent is not to stifle your creativity but to maintain a consistent look and feel throughout your community.
As with obtaining a building permit,?it's best to error on the safe side:?read your governing documents carefully and check with your association's architectural committee, board of directors or other community management group to ensure your planned improvements are acceptable.
1. How can I better manage my household budget?
It's smart to reassess all of your spending and saving choices and create a budget that will help you and your family move forward. The good news is: you're in charge of your money—and a few changes here and there can make a big difference in your wallet without having a drastic effect on your lifestyle. Here are some?helpful tips?to guide your budget management decisions.
2. What are the benefits and considerations of debt consolidation?
Benefits: Using your equity to pay down debt can eliminate stress and worry and put you on a solid path to financial freedom on your own terms. Plus, you'll enjoy the stability of one fixed monthly payment at a fixed interest rate that's probably much lower than what you're currently paying to multiple creditors. With multiple term options, you can choose to save more or save less in interest based on the monthly payment you can afford. And very likely, you'll be able to deduct up to 100% of the interest you do pay from your taxes-an advantage you don't get with credit cards or personal loans (consult your tax advisor to see if you qualify).
Considerations: The relative benefits of a loan for debt consolidation depend on your individual circumstances and your actual debt payments. You will realize interest payment savings when you make monthly payments towards the new, lower interest rate loan in an amount equal to or greater than what you previously paid towards the higher rate debt(s) being consolidated. Keep in mind, though, while your monthly payments will be lower, in the long term you may pay more interest because the debt is extended over a longer period of time. Note: No Discover loans may be paid off with this debt consolidation.
3. How do I figure out how much money I'll need?
Gather the latest statements for all the bills and loans you want to pay down and carefully review the interest rates and terms. These can include:
- auto loans
- boat/RV loans
- credit cards
- personal loans
- other home equity loans or lines of credit
- other high-interest debt
As a starting point, you'll want to know how much you owe on each debt, the interest rate / APR you're paying, and what you typically pay. Our?Debt Consolidation Calculator?will help you figure out your total debt, how long it will take to pay it off, and how much you'll pay if you continue your current course, and your potential savings with debt consolidation
4. Can Discover Home Equity Loans pay my creditors directly with the proceeds of my loan?
Yes. We know that after you get your loan, the prospect of contacting your creditors and writing individual checks to each can feel a little overwhelming. With your permission, as part of your loan transaction Discover Home Equity Loans will be happy to handle this for you at no additional cost by paying your creditors directly and sending any remaining funds to you.
1. What makes a home equity loan the right choice for major purchases and life events?
With a home equity loan, you can:
- borrow exactly what you need—up to $200,000.
- lock in a lower fixed interest rate than most unsecured loan options.
- $0 origination fees, $0 application fees.
2. How do I determine how much money I'll need?
Research and compare all costs. Many major purchases and life events have significant 'hidden' costs that might not be obvious. For example, if you're planning a special anniversary cruise, you should consider not only your destination but also:
- the duration of the cruise.
- which cruise line you want to sail and what class you can afford.
- round-trip airfare to and from the ship.
- the cost of extra shipboard amenities, shore excursions and tips.
- pre—and post—cruise accommodations and dining.
- car rentals.
- cash and the cost of currency exchange.
- wardrobe and luggage expenses.
Similarly, buying a new car could lead to higher auto insurance payments; hosting a wedding involves paying for countless details that can quickly and significantly add up. See?how much you can qualify for?to find out if your loan can cover all the costs of your purchase. If not, review your plans and see where you can economize.
3. What can I use a Discover Home Equity loan for?
In addition to home improvement and debt consolidation, a Discover Home Equity loan can be used for a wide variety of purchases and experiences. For example, you could:
- 1. How will my Annual Percentage Rate (APR) be determined?
- 2. Are there any fees associated with a Discover Home Equity loan?
- 3. What types of properties can be used as collateral for a Discover Home Equity loan?
- 4. What documents do I need to apply?
- 5. Can I submit documents online during the application process?
- 6. How long does the loan process take?
- 7. What type of expenses can my home equity loan cover?
- 8. What is the home appraisal process?
- 9. How does an Automated Valuation Model (AVM) work in valuing my home as compared to an appraisal?
- 10. What is the loan closing process?
- 11. Can I manage my account online?
- 12. Can I make my payments automatically?
1. How will my Annual Percentage Rate (APR) be determined?
Your?APR?is determined using factors like your credit history, loan amount, the amount of equity you will have in your home after receiving the loan, and repayment term.
2. Are there any fees associated with a Discover Home Equity loan?
We have no application, origination, or appraisal fees, and no cash is required at closing. We may charge a fee if your payment is late or if you do not have sufficient funds to cover a payment. We pay all closing costs incurred during the loan process, so that you don't have to bring any cash to your loan closing. In the event that you decide to pay off your loan balance in full within 36 months after your loan closes, you will be required to reimburse Discover for some of the closing costs, not to exceed $500.00. Reimbursable closing costs will include all title fees, recording fees, and mortgage/transfer taxes (if you reside in Connecticut, Minnesota, North Carolina, or Oklahoma you are not required to reimburse the closing costs).
3. What types of properties can be used as collateral for a Discover Home Equity loan?
You can apply for a Discover Home Equity loan for a home that you own and live in as your primary residence. This residence must be a single family dwelling. Eligible property types include Planned Unit Developments (PUDs) and condominiums. Other properties, such as investment properties, manufactured homes, commercial properties, and trusts are not eligible for a Discover Home Equity loan at this time.
4. What documents do I need to apply?
Your Personal Banker will provide you with an initial list of documents we need to get started. Every loan is different, so we may request additional documents as we move through the loan process. See the?Common Mortgage Documents eBrochure?for a handy checklist and document requirements.
5. Can I submit documents online during the application process?
Yes. You can submit your documents online in our secure website:DiscoverHomeEquityLoans.com/Login. Submitting documents online will help speed up the processing of your loan request.
Our secure website also lets you view your loan status, check your to-do list, review status of sent documents, and more!
6. How long does the loan process take?
The actual length of time varies by homeowner. When you apply for a loan with Discover, we'll make sure that you're updated on your progress and closing date along the way.
7. What type of expenses can my home equity loan cover?
Home equity loans may be used to for home improvements or repairs, to consolidate and pay down high-interest debt or to make a major purchase such as a life event.
8. What is the home appraisal process?
Your Personal Banker will estimate your home value by reviewing multiple data points, such as an Automated Valuation Model (AVM), Property Condition Report, and the stated value of the home that you provide. In some cases, an appraiser will drive to your home and conduct an appraisal by viewing the exterior only.?If you reside in Texas, an internal appraisal is required. Regardless of appraisal method, there are no appraisal fees.
9. How does an Automated Valuation Model (AVM) work in valuing my home as compared to an appraisal?
An AVM uses mathematical modeling to estimate your home's value, using inputs such as data on comparable home sales, listing trends, and home price changes. An appraiser also uses multiple methods, such as reviewing comparable sales and estimating the cost to build a similar home, in order to arrive at an estimated value. As well, an appraiser will consider property features or defects that are visible during the inspection of the property that would impact home value.
10. What is the loan closing process?
The loan closing process is quick and convenient. The average closing takes about 45 minutes and in most cases, a notary will meet you at your home, office, or other convenient location where you will sign your loan documents. In some states, an attorney that we will provide will need to be present as well. Once the loan is closed, you have three business days to change your mind and cancel the loan, known as the right of rescission. Funds are disbursed on the 4th business day, but it can take up to 10 business days after disbursement to receive the funds, depending on the type of disbursement.
11. Can I manage my account online?
Yes. Once your loan funds, we will mail you a Welcome Kit that explains how to set up your online servicing account. You'll be able to view statements, manage payments, set up email notifications, get tax documents, and more.
The Welcome Kit also contains additional information about your loan and explains how to read your statement.
12. Can I make my payments automatically?
Yes. One of the documents that will be provided to you at closing is the form for enrolling in automatic payments. This form asks for information on the checking or savings account that you would like your monthly payment automatically withdrawn from along with a voided blank check or savings account deposit slip. You will receive a confirmation letter once you have been successfully enrolled in the automatic payment program. You can choose to enroll in or cancel automatic payments at any time.