FLEX EQUITY LINE OF CREDIT (FELOC) Frequently Asked Questions Q What is the Flex Equity Line of Credit? A The Flex Equity Line of Credit combines the benefits of a line of credit and a fixed rate home equity loan giving you enhanced flexibility and control for managing your personal financial situation. Q What are the benefits of the Flex Equity vs. a traditional home equity line of credit or a traditional fixed rate home equity loan? A The Flex Equity provides a revolving line of credit so that funds are always available at any time should they be needed. However, with the Flex option, you can fix the rate on a portion of your line of credit allowing you to lock in payments at specific level. The Flex Equity Line of Credit is an attractive option, especially if you : 1. Desire a line of credit but may be concerned with the impact future potential interest rate increases may have on your monthly payments. 2. Desire predictability and better control over your payment amount and repayment period. With a Flex Equity Line of Credit, you can insulate yourself from variations in interest rates. The Flex Equity Line of Credit can potentially save you large sums of money should/when interest rates begin to increase. Q How much can be fixed with the Flex Equity option? A You can elect to fix up to as many as five balances at one time during the draw period. The amount of each fixed rate balance can be as little as $5,000 up to the maximum amount available on the line of credit. Q How long is the payback period on a Flex Equity fixed rate balance option? A You can choose 5 to 15 years for the payback period. As you pay down the Flex Equity balance, you can borrow again on the line of credit up to the credit limit. Q What types of purchases/expenses are ideal for the Flex Equity Line of Credit? A The Flex Equity Line of Credit may be used for virtually any need. However, it may be best suited for long- term and/or ongoing needs such as home improvements, college expenses, or a vehicle purchase. Q Is the Flex Equity Line of Credit tax deductable? A The loan may be tax deductable. NIHFCU does not provide tax advice. You should ask your tax advisor about tax deductibility. What if I already have a traditional Home Equity Line of Credit with NIHFCU, am I eligible for the Q Flex Equity option? A You may request to have the fixed rate option added to your current HELOC. Q If I already have a fixed equity loan with NIHFCU, can I refinance at a lower rate? A Please refer to your loan documents to determine if you are eligible to refinance for a lower rate. Generally members are eligible to refinance to a lower rate after two years on an equity loan. If you would like to refinance prior to the two years, you must apply and receive a minimum of $25,000 new money or you will have to pay all the closing costs with the new loan. Q Are there any additional fees or penalties associated with the Flex Equity Line of Credit? A The fees and other penalty terms are as follows: • The Credit Union will pay closing costs up to a maximum of $600 except the expense of an appraisal and full title insurance policy if required. Costs over this maximum will be the responsibility of the borrower. • The member will also be required to take a minimum draw of $5,000.00 (new money) when the line of credit is established. If no draw is taken at the time an equity line of credit loan is funded, all closing costs are paid by the borrower. • If the member’s line of credit is paid off within the first two years of origination, the closing costs paid by the Credit Union must be reimbursed. In the case of Internal refinances, the borrower must apply and receive a minimum of $25,000 new money or borrower will pay all closing costs if the loan being refinanced is less than two years old. • If the member’s LTV is 80% or less and the line of credit is $100,000 or greater with an initial draw amount of $50,000 or greater of new funds, and your credit qualifies, NIHFCU will pay all closing costs except the expense of an appraisal and full title insurance policy (if required). • Members wanting to refinance existing balances must have new money of the minimum loan amount of $50,000 to qualify for the no closing cost option and an interest rate less than Prime. Closing costs on equity loans that close concurrently with a first mortgage loan as part of a purchase or refinance transaction are paid by the borrower. Additional transfer taxes for properties owned for less than one year are paid by the borrower. Q Can you provide me with an example as to how the Flex Equity works and how I can potentially save money on my loan? A The main feature that will benefit members is the opportunity to change an adjustable rate loan into an equity fixed rate loan. As an example: • A Flex Equity LOC with an original amount of available credit of $100,000 and a current balance of $25,000 at the current rate of 4% would have a payment of $184.00. • If the Prime rate increased to a rate of 7.5%, the payment would increase to $232. The fixed rate balance of $25,000 at 6.99% would have a payment of $225 for 15 years. The above example is for demonstration and estimation purposes only. Q In which states can I get a Flex Equity Line of Credit? A The Flex Equity line of credit is secured by your primary residence. The line of credit is available for a primary residences in Maryland, Virginia, the District of Columbia, West Virginia, Pennsylvania and Delaware. Loans are made on single family homes, town homes and condominiums. Certain restrictions apply to condominiums. This program is not available for cooperative, mobile homes or time-share properties. Q What is my maximum loan amount? A The maximum loan amount is $250,000.00. Subject to this maximum, you may apply for an amount up to 80% of the value of your residence, less the outstanding balance of your first trust mortgage. Any other mortgages or liens against your property (except mortgage and liens held by NIHFCU) would be required to be paid in full at settlement. The minimum loan amount is $10,000.00. Q What is the interest rate? A The Interest Rate and Corresponding Annual Percentage Rate (APR) is a variable rate. It is based on the Composite Prime Rate as published in the Money Rate Box of the Wall Street Journal. The interest rate is set on the last business day of each calendar quarter. Your interest rate will be Prime + 0% if your loan to value(LTV) is 80% or less. All rates quoted are with an automatic payment or payroll deduction feature. Not using the automatic payment or payroll deduction will increase your rate by .25%. Likewise, If payroll deduction or automatic payment is discontinued, the interest rate and corresponding APR will increase by .25% and an increase in the interest rate will result in an increase to the payment. The minimum rate for these loan products is 4.00%. Q What documentation is required to apply? A You can apply online. This is the fastest and most convenient way to apply. Applications can also be submitted via paper application. Required: Completed Application Borrowers and co-borrowers most recent pay stub with at least 30 days of year to date pay (as applicable) most recent leave and earning statement(s) and verification of non-employment income such as retirement, annuity or Social Security Most recent W-2’s If self-employed, complete most recent federal income tax returns with all schedules A copy of your Homeowners Insurance Declaration page Additional items that may be requested: A copy of the recorded Deed of subject property securing the loan A copy of the most recent mortgage statement, recorded deed of trust and note (for all liens against secured property) Additional items as required Q What is the Draw and Repayment period? A You may draw upon your line of credit at any time in any amount over the $100 minimum draw amount for the duration of ten (10) years after settlement. When the draw period has expired, you will have fifteen (15) years in which to repay the remaining balance. You may repay your loan either by monthly transfer from your NIHFCU account or you can elect to be billed monthly. Initial draw is a minimum of $5,000. If you do not take the initial monthly draw, you will be responsible to pay all closing costs. Q Is the full amount required to be borrowed at time of closing? A No. There is, however, a minimum initial draw requirement of $5,000.00 ($50,000 minimum initial draw of new money to qualify for the no closing cost option) unless all closing costs are paid by the borrower. Either you or the joint applicant may draw upon the line of credit at any time for the duration of the draw period of ten (10) years. Q How can advances on a Flex Equity Line of Credit be obtained? A You may receive advances on your line of credit by a check or through a transfer to your NIHFCU checking or savings account. Requests can be made in person, by telephone, fax, e-mail, mail or online through our 24-Hour Online banking system (CU@Home). * IMPORTANT * Please note that ACH advances can NOT be made on a FELOC. Funds must be transferred to a Checking (Share Draft) Account to have funds transferred via ACH. Q How can a member lock in a portion of their Flex Equity Line of Credit? A You will need to fill out and sign the Flex Equity Fixed-Rate Option Request Form which will can be found on NIHFCU’s Web site or obtained at any NIHFCU branch. The form can be, mailed or faxed to the mortgage department at: 301-816-9237. The form can also be dropped off at any NIHFCU branch. * IMPORTANT * Requests must be received by the Mortgage Department by noon to be process that day. Requests received after the cut off will be processed the following day. Q How are monthly payments determined? A The maximum repayment amortization is fifteen (15) years, with no prepayment penalties. The minimum monthly principal and interest payment on Flex Equity Line of Credit will be determined by the amount your outstanding loan balance after each advance or rate change and will never be less than $100.00 per month. Increases or decreases in the interest rate will result in like increases or decreases in your scheduled payments. You will receive notification prior to any rate increases. The Flex Equity Line of Credit can provide significant new financial opportunities for you by permitting current use of the equity in your home and by taking advantage of the current tax laws, without paying some of the standard settlement costs. Please seek the advice of a tax consultant for tax benefits. There are several ways you can submit an application: - For optimal speed and convenience, we recommend using our online application on www.nihfcu.org - By Fax: (301) 816-9237 (attention Mortgage Department) - By Mail: NIH Federal Credit Union, Attention: Mortgage Department, 111 Rockville Pike, Suite 500, Rockville MD, 20850 - Or, you may drop this form off at any NIHFCU branch location If you have additional questions please call one of our mortgage representatives during regular business hours at (301) 718-0208. Select "Option 5" from the automated menu to reach Mortgage Services. Information as of April 2, 2009; subject to change without notice.