Editor’s Take: A HELOC from Flagstar could be a great option for people who are interested in a long-term line of credit and who live close to one of the bank’s branches. Loan amounts are flexible, and there’s a rate discount for Flagstar customers. People who are interested in a fixed-rate HELOC may want to look elsewhere.
Flagstar HELOC at a glance
Fixed or variable rate: Variable
How to withdraw funds: Checks, in person, online or phone withdrawals
Origination fee: No
Loan-to-value ratio: 85%
Time to fund: Does not disclose
Flagstar Bank is one of the largest regional banks in the country. While the bank has a relatively small physical footprint, it offers home equity lines of credit nearly nationwide. But make sure to check if HELOCs are offered in your state before starting the application process.
Pros
- Flexible loan amounts
- Opportunity to avoid closing costs
- Interest rate discount for Flagstar banking customers
Cons
- Limited access to funds
- Small physical footprint
- No fixed-rate option
4 things to know about a Flagstar HELOC
Before you apply for a HELOC with Flagstar Bank, here are a few features and potential downsides to consider.
1. Loan amounts and payments are flexible
Flagstar offers HELOCs ranging from $10,000 to $1 million, providing options for borrowers with all kinds of needs. But the lender limits how much you can borrow based on your equity — you can’t borrow more than 85% of your home’s value. This includes the HELOC and your primary mortgage balance.
You can make interest-only or full monthly payments during the draw period. Either way, your minimum monthly payment will be $100.
2. The HELOC has relatively low costs
Flagstar offers a 10-year draw period and a 20-year repayment period. Plus, the lender will waive all bank closing fees if you keep your HELOC open for at least 36 months. Flagstar doesn’t disclose what the fees are if you close your account early.
The lender does charge a $75 annual fee but waives it the first year. That said, HELOCs of $500,000 and up require borrower-paid lender’s title insurance.
3. The bank’s small physical footprint creates limitations
If you set up automatic payments from a Flagstar checking or savings account, you can get a 0.25% discount on your interest rate. But you can currently only open a bank account with Flagstar at a brick-and-mortar branch, which may not be available where you live.
You can only access your funds via checks, online, through withdrawals at a local branch or by calling the lender. Other lenders may allow you to access your HELOC funds through a linked debit card.
4. There’s no fixed-rate option
Some HELOC lenders allow you to convert some or all your balance to a fixed-rate installment loan, even during your draw period. This feature can potentially shield you from increasing interest rates on an otherwise variable-rate loan.
Flagstar Bank doesn’t offer this option on its HELOC.
Is there a downside to having a HELOC?
A HELOC can offer ongoing access to a revolving line of credit. But if you’re not careful, you could rack up a significant amount of debt — and if interest rates increase over time, that debt can become increasingly expensive. If you can’t afford to repay your HELOC, the lender could foreclose on your home and force you out.
As a result, it’s important to consider both the benefits and drawbacks of getting a HELOC before you apply.
Who is a Flagstar HELOC good for?
A Flagstar HELOC is best suited for existing Flagstar Bank customers who can take advantage of the lender’s interest rate discount and branch withdrawals.
But even if you don’t live near a Flagstar Bank branch, it can be worth considering if other HELOC loan amounts don’t provide you the flexibility you need. It can also be a great way to avoid closing costs if you have plans to keep the account open long enough to qualify for the waiver.
That said, you may consider another option if you prefer more flexibility with accessing your funds, or if you want the option to convert portions of your balance to a fixed-rate loan over time to reduce your exposure to fluctuating interest rates.
How to apply for a Flagstar HELOC
Flagstar Bank doesn’t disclose its credit or income requirements to get approved but does state that you can only borrow up to 85% of your home’s value (combined with your primary mortgage balance).
If you’re interested in applying, you can call a Flagstar branch or fill out a form online with your name, ZIP code and contact information, and a representative will contact you to get started.