PenFed Credit Union: 2022 Home Equity Review

This nationally accessible credit union offers a HELOC to its more than 2 million members.

Pentagon Federal Credit Union, better known as PenFed, is the second largest federal credit union in the country, serving more than 2.3 million members in all 50 states and the District of Columbia. 

PenFed logo against dark blue background
PenFed Credit Union

Based just outside the nation's capital in Tysons Corner, Virginia, PenFed -- listed among CNET's best credit unions for 2022 -- mainly serves the armed forces community and government employees. But unlike many not-for-profit credit unions that have requirements to join, there are no restrictions to membership; anyone can join. And membership has its benefits including providing competitive rates on its home equity line of credit, or HELOC.

PenFed Credit Union: At a glance

While PenFed offers a variety of financial products services -- including checking and savings accounts, credit cards, personal loans, mortgages and VA loans -- it offers only one type of home equity loan, a HELOC.

Types of loans offered HELOC
APR Starting at 8.25%
Loan amount range $25,000 to $1 million
Credit score minimum 700
Repayment terms 10-year draw period, 20-year repayment period
Average time for approval Not specified

PenFed is best suited for people who are affiliated with the armed forces and employees of the government who have good-to-exceptional credit. Homeowners with solid credit can take advantage of the credit union's reasonable interest rates and low fees that its HELOC offers.

What we like

  • Fixed-rate lock option: You can lock in up to two fixed rates in a calendar year during the draw period on some, or all, of your HELOC balance if you owe $10,000 or more. This is a beneficial option if you're seeking a more stable payment schedule as the interest rate on a HELOC is variable.
  • Flexible borrowing limit: PenFed's HELOC gives homeowners the flexibility to borrow as little as $25,000 or as much as $1 million. Homeowners with a combined loan-to-value, or CLTV, ratio as high as 80% can borrow as much as $500,000 against their home's equity.
  • Most HELOC closing costs are covered: PenFed pays nearly all of the closing costs associated with opening a HELOC. One fee you'll have to pay is the appraisal fee provided that an appraisal is required. 

What we don't like

  • Limited transparency: While PenFed's website provides information on its HELOC's interest rates, repayment terms, eligibility requirements and application process, you'll be hard-pressed to find much more. You'll need to contact a PenFed agent for more detailed information on eligibility requirements, repayment terms and approval process.
  • Not all property types are eligible: PenFed's HELOC is only available on primary, owner-occupied homes. Mobile homes, properties with more than four units, undeveloped land and time shares aren't eligible for the HELOC. 
  • Members in seven states must pay all taxes: PenFed members whose property is in either Florida, Louisiana, Maryland, Minnesota, New York, Tennessee or Virginia are responsible for any city, county and/or state taxes.

Home equity loan options

PenFed offers only a HELOC as part of its home equity services, providing members with the opportunity to have a revolving line of credit based on the home equity they have. With PenFed, loan amounts range from $25,000 to $1 million. Keep in mind, however, that loan amounts of more than $500,000 are limited to applications based on occupancy type, lien position, CLTV, credit score and are subject to a full appraisal, according to PenFed. For an owner-occupied property, the minimum loan amount is $25,000 and the maximum amount is $500,000, with a CLTV of 80% or less of the fair market value.

PenFed's HELOC consists of a 10-year draw period and a 20-year repayment period. During the draw period, you're required to make payments only on the interest. What's more, you have the ability to switch between a variable interest rate and a fixed interest rate on qualifying interest payments. 

Fees

HELOC closing costs are typically covered by PenFed. The only closing cost you may have to pay is an appraisal fee if you're required to do an appraisal on your property. The typical appraisal cost can range between $550 and $850. However, members whose primary property is in either Florida, Louisiana, Maryland, Minnesota, New York, Tennessee or Virginia will be responsible for paying any city, county and/or state taxes.

What's more, you may be required to pay a $99 annual fee. This fee is only charged if you paid less than $99 in interest in the 12-month period before your account anniversary. 

How to qualify

PenFed's home equity team will evaluate your HELOC application on a variety of factors. First, you must have a credit score of at least 700 and a "favorable" debt-to-income, or DTI, ratio. You also have to provide proof of income and proof that you've been paying your mortgage on the property. You'll also have to verify bank activity and show proof of any other debts you may have. 

Your property also must meet certain requirements: It can't be under major construction and it must be livable. Certain types of properties don't qualify, including mobile homes, time-shares, properties currently for sale, multifamily properties with more than four units and undeveloped land. 

Getting started

Take some time to prepare your paperwork before you apply for a PenFed HELOC as you'll need them handy before starting the process. Gather these documents before you apply:

  • Your basic information and contact details
  • One to two months' worth of paystubs
  • At least one year of your Form W-2
  • At least two months' worth of recent bank account statements
  • Mortgage statements for all of the properties you own
  • Proof of any self-employment income

Once you've gathered everything you need, you can start the application process. Applications can be made online. You can apply here on PenFed's website. You can also call 800-208-0596 for any questions specifically about the application. 

Customer service

PenFed customer service reps can be reached by email, phone or chat. A contact form is available on its website where you can fill out your contact information and submit your questions. Upon completing the form, you can choose to have a representative get back to you by phone or email. Alternatively, you can chat with a representative using the chat option on its website's Contact Us page. 

If you prefer to reach out by phone, you can call PenFed toll-free at 800-247-5626. Customer service representatives are available Monday through Friday from 4 a.m. to 8 p.m. PT, Saturday from 5 a.m. to 8 p.m. PT and Sunday from 6 a.m. to 2:30 p.m. PT.