Pentagon Federal Credit Union is offering a home equity line of credit (HELOC) with an annual percentage yield (APR) of 3.25 percent. The rate is prime plus 0 percent as of March 26, 2009. This rate is for a variable line of credit and the rate changes once per quarter.

PenFed also offers a 5/5 home equity line of credit. The rate on this loan only changes once every 5 years. The initial rate is higher on this line of credit than the variable line of credit. Currently the APR is 4.51 percent.

The 3.25 percent rate on the variable line and the 4.51 percent rate on the 5/5 if for an owner occupied home (you must live in the home). PenFed also offers loans for non-owned occupied homes. The rates for a line of credit on these homes are higher. Currently the variable home equity line of credit APR is 4.25 percent and the 5/5 home equity line of credit rates is 6.03 percent.

The loan-to-value on the owner occupied home is 80 percent and the loan-to-value on the non-owned occupied home is 70 percent. Loan-to-value (LTV) means the total amount owned on a home cannot exceed a certain percentage. Until recently banks and lending institutions were handing out loans up to 100 percent LTV or even higher, but they are being a lot more conservative in lending because home prices are falling these days. Mortgage rates have also come down more slowly than interest rates have.

Some features of the PenFed variable home equity line of credit

• No Points – You don’t pay additional money at closing. Usually 1 point is equal to 1 percent of the value of the line or loan
• No Closing Costs – PenFed will pay all closing costs associated with HELOC. If you pay the line off or close it within 24 months from the anniversary date of the loan closing, you will have to pay the full amount of the total closing cost for the loan
• Tax Deductible Interest – The interest you pay on the HELOC might be tax deductible, check with your accountant
• Fixed-Rate Equity Loan – Available in all 50 states and District of Columbia. Rate is dependent on term length, loan to value ratio, fair market value, and owner occupancy
• Variable-Rate Equity Line of Credit – Available in all states. There are additional restrictions for lines in Texas
• Owner-Occupied Property – Terms up to 20 years
• Non-Owner Occupied Property – Terms up to 12 years
• Equity Line of Credit Amount  – $10,000 to $400,000

Some features of the PenFed 5/5 home equity line of credit

• No Points – You don’t pay additional money at closing. Usually 1 point is equal to 1 percent of the value of the line or loan
• No Closing Costs – PenFed will pay all closing costs associated with HELOC. If you pay the line off or close it within 24 months from the anniversary date of the loan closing, you will have to pay the full amount of the total closing cost for the loan.
• Tax Deductible Interest – The interest you pay on the HELOC might be tax deductible, check with your accountant.
• Rate Adjusts Once Every 5 years – Rate is locked at date of application, set for 5 years. Reset for another 5 years. The index is the United States Treasury Security adjusted to a constant maturity of 5 years, as published in the Wall Street Journal and other publications. To determine your Annual Percentage Rate, we may add a margin of up to 2% for owner occupied properties and up to 3.5% for non-owner occupied properties.
• Owner-Occupied Property – Terms up to 15 years. (180 months)
• Non-Owner Occupied Property – Terms up to 12 years. (144 months)
• Equity Line of Credit Amount – $25,000 to $400,000

Home equity line of credit rates are lower than home equity loan rates. Another good thing about getting a HELOC instead of a home equity loan is with a equity line of credit you are able to withdraw only the amount you need at the time and only pay interest on the amount you use. With a home equity loan you take the entire loan amount at closing and pay interest on the entire amount from day one.

PenFed is a credit union so you will have to join PenFed to qualify for these great rates. There is certain criteria you have to meet to be eligible to join. Visit their website, Pedfed.org, to find out more