Your Guide to Personal Loans and Home Mortgages

You have dreams and financial goals whether it’s a new home, remodeling your kitchen, a new car and so much more. Security Bank & Trust Co. is here to help you make those dreams come true. 

Your first step…

Come in and talk to one of our lenders. After determining which of our products will work best for your situation, you’ll need to complete an application. When you return it to us, we will also need your personal financials, verification of accounts and tax returns for the past two years and any bids, purchase orders or estimates you may have received.

How to calculate your debt-to-income ratio & what does it display?

Your DTI ratio compares how much you owe each month to how much you earn. Think of it as the percentage of your gross monthly pretax income that goes towards payments for rent, mortgage, credit cards, or other debt. To calculate your debt-to-income ratio:

Step One

Add up your monthly bills which may include:

  • Monthly rent or house payment
  • Monthly alimony or child support payments
  • Student, auto, and other monthly loan payments
  • Credit card monthly payments (use the minimum payment)
  • Other debts

Step Two

Divide the total by your gross monthly pretax income (income before taxes).

*Note: Expenses like groceries, utilities, gas, and your taxes generally are not included. 

Your goal should be to target a DTI ratio of less than 35% and to manage your obligations to no more than 43% of your gross monthly pretax income. This will position your financial profile in the best light for an application on a personal loan. Moreover, banks use the DTI ratio as a measure of your ability to manage the payments you make each month so the lower the ratio, the stronger your application.

What do you have for down payment, collateral or are you looking for an unsecured loan?

When planning for a major purchase or expense, it’s quite typical to look at a checking or savings account balance or the available limit of credit on a credit card… but have you realized how much equity you may have in some of the items you already own?

Equity is the value of a piece of property (Assets) based on the current market rate less any loans you have against it (liabilities).

 

Asset – Liabilities = Equity

 

For example, let’s say you bought your current home 10 years ago for $250,000 and put $50,000 (20%) down when you closed. After making the regular principal and interest payments monthly, you’ve now brought your mortgage balance from $200,000 to $160,000.  If current home values for your area have remained the same, you could have up to approximately $90,000 worth of equity (250,000-160,000 = 90,000) available to you.  If current home values have increased, the amount of equity will increase as well and in a loan scenario that value is determined by an appraiser. This appraiser is a disinterested third party and must be engaged by the bank.  Generally, the value is based on recent sales of similar properties in your area that have sold within a specific time frame. 

Equity in a home can be used to secure a loan or a line of credit.  Your lender will help you determine which one will work best for you and your situation.

If you are purchasing a new vehicle, boat or other piece of equipment, you will not always have equity built up. In that case, we would use the item being purchased plus a cash down payment from you to secure the loan.

 

If you chose a Home Equity Loan

These loans are good if you want to take out a specific amount of money once for a project.  Home Equity Loans are “closed ended loans” meaning you borrow the money once and then pay it back in full.  The money is not available to be borrowed again.  This is an ideal choice for the home remodeler who has a set budget they want to spend and want to pay it back with the same payment amount monthly. The amount of the loan is based on the amount of equity you have available in the property.

  • Fixed loan amount
  • Fixed monthly principal and Interest payments
  • Loan amount is based on available equity in home

If you prefer a Home Equity Line of Credit

Home Equity Lines of Credit (HELOC) are revolving or “open” lines of credit that you, the customer, can use and payback as often as needed up to an agreed upon dollar amount. They can be used for a myriad of purposes from personal expenses to remodeling, vacations, purchase of an investment property and more.

  • Interest only payments monthly
  • 12-month fixed rate or 60-month variable rate terms
  • Line of Credit amount is based on available equity in home

Types of Loans

Bridge/ Construction Loans

When building your dream home or remodeling your existing residence, our construction or bridge loans are going to be the answer for you. We offer short term, interest only financing to help you get through the process.

To start off, your lender will look at your construction budget, personal financials, architect’s schematics and end financing options. Then based on the cost, finished project value, purchase price of the land, financials and our analysis; we will work together to disburse funds as the project moves forward. We prefer that you have permanent (end) financing secured and your lender can offer options.

  • Construction disbursements as project moves forward
  • Interest only payments monthly during construction process
  • Permanent financing options available

Check out our New Home Construction and Remodeling loans page for more information.

Home Mortgage & HELOC Loans

Home mortgages and home equity loans are two different types of loans you can take out on your home. A first mortgage is the original loan that you take out to purchase your home. A home equity loan is generally a second mortgage that you have used to capitalize on the equity in your home for either down payment support, home improvements or other purposes. We work hard to make sure you find the best option for your finances.

  • Secured by your principal residence
  • Principal and interest or interest only payments
  • Differing term lengths depending on type and purpose of transaction

Personal Loans

Our personal installment loans are designed with you in mind. You have dreams and we are invested in helping you achieve those dreams. Whether you want to finance that new dock, boat, car, RV or motorcycle or even your dream vacation, we can look at the right financing option for you. Depending on the complexity of the request, we can make the turnaround time fairly short.

  • Secured and unsecured loans with terms up to 48 months
  • Set principal and interest payments monthly

Overdraft Protection

Overdraft Protection/ Ready Reserve loans are there for you when your checking account is a little short of funds. These reserve accounts are tied to your checking account and if you ever overdraft your account, funds will be transferred in to cover.

  • Unsecured
  • Revolving credit - the funds are available to be used again as needed
  • Higher interest rate due to unsecured nature
  • Designed to be paid back quickly
  • Minimum monthly payments are auto-debited from the checking account.

These accounts are wonderful for the deposit customer who wants to avoid paying overdraft or returned item charges.

We hope you found this overview of personal loan options useful. If you have any questions, please contact us today. We’re personal and friendly. Our goal is to get you the best answer for you. That’s another way we are Growing, together.

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