Author Topic: Any Hot Tips on a cheap HELOC  (Read 307 times)

appleshampooid

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Any Hot Tips on a cheap HELOC
« on: July 10, 2018, 08:44:25 AM »
Hello MMM forumers, I am looking at opening up a HELOC as an emergency fund. So far, I have inquired at our local bank where we just have a checking account as well as the bank that holds the first mortgage.

Local bank has 2 options: a "local special" (only valid if your home is in a certain radius) with a low promotional rate for 18 months then a prime+ rate, and a standard one with a flat rate that is prime- (the plus and minus is less than a percentage point each way, I don't remember). The standard option has closing costs of about $500. No closing costs on the special. No ongoing fees to keep them open, standard 10/10 (10 years draw period, 10 years repayment period). There are some provisions around direct deposits into our checking account to waive all the ongoing fees, which we will satisfy with our paychecks.

Since this will be for emergencies only (don't intend to draw on it), I am leaning toward the promotional rate since there are no closing costs. Then I saw in the fine print that you're required to draw $25,000 at closing 🙄. Which is annoying since I don't need any cash right now. I could pay it all right back, but there could be penalties for doing this (since they probably put this requirement in to make sure they get some interest from you). The banker I talked with in person didn't mention this, which is annoying. I've called them to ask if the immediate repayment would cause problems but am waiting on a call back. If there are no penalties and I ended up paying a month of interest at the promotional rate on $25,000, it will be about $80. Still cheaper than the other option.

The bank that holds the first mortgage would require me to pay for a new appraisal ($400) but wouldn't charge any other fees.

My question for the board: if you have a HELOC and like it, where did you get it? I am interested if there are any national banks that will offer one with no closing fees and no bullshit, assuming I don't have any other accounts there. Basically I want to not pay anything unless I use the line and pay interest.

Retire-Canada

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Re: Any Hot Tips on a cheap HELOC
« Reply #1 on: July 10, 2018, 09:51:05 AM »
Talk to them about a LOC without tying it to your home equity. That's what I have for my EF and while the rate is higher than a secured LOC/HELOC since it's a EF I don't care as I am not going to use it and hold a balance often. The reason I suggest this type of product is that it shouldn't have any fees attached for opening then not using it plus if you are a high saver/low spender it's easy to get 6-12 month's worth of credit on a LOC. I don't see a need for more personally.

appleshampooid

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Re: Any Hot Tips on a cheap HELOC
« Reply #2 on: July 10, 2018, 09:53:19 AM »
Talk to them about a LOC without tying it to your home equity. That's what I have for my EF and while the rate is higher than a secured LOC/HELOC since it's a EF I don't care as I am not going to use it and hold a balance often. The reason I suggest this type of product is that it shouldn't have any fees attached for opening then not using it plus if you are a high saver/low spender it's easy to get 6-12 month's worth of credit on a LOC. I don't see a need for more personally.
Interesting, I hadn't thought about that. I will look in to it.