Author Topic: I'm getting my first HELOC on my primary. What to expect?  (Read 482 times)

clarkfan1979

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I'm getting my first HELOC on my primary. What to expect?
« on: November 14, 2020, 02:39:34 PM »
I'm currently refinancing my primary home from 4.125% to 2.875%, no cash-out. I decided to follow the advice of others and explore the idea of a HELOC. After we close on the re-fi in about 30 days, my mortgage broker will farm me out to a 3rd party for the HELOC. I have never done this before and have some basic questions.

1) What is a good interest rate for a HELOC right now? I know that they are mostly variable. I have a friend that got a HELOC about two years ago. He is 1.9% above prime. Prime is at 3.25% right now, so he can borrow money at 5.15%. Is this competitive?
 
2) If you borrow money at 5.15% and the interest rate goes up to 6.15% in 2 years, do you have to pay the money back at the current rate or the original rate when you pulled the money out?

3) How long does the process typically take. I think my mortgage broker was saying 2-3 weeks after the closing of the re-fi.

Anything else I should be aware of?

katsiki

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Re: I'm getting my first HELOC on my primary. What to expect?
« Reply #1 on: November 14, 2020, 03:13:04 PM »
I did a heloc with this CU years ago.  They are great.  You may want to consider them but you might also just check them out for a rate comparison.

https://www.hfcu.org/loans-and-credit-cards/home-equity.html#goto_6

The process as I recall was pretty quick, quicker than a mortgage refi.  It has been many years but I would guess 30-45 days max.

uniwelder

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Re: I'm getting my first HELOC on my primary. What to expect?
« Reply #2 on: November 14, 2020, 03:38:37 PM »
I had replied to your other posting about using a heloc to replace your mortgage--- the big warning was the hit to your credit score if you max it out.  In regards to this posting---

1) My heloc on primary house is .25% below prime with a floor of 4%, so its been sitting at 4% for a while now.  I've seen them advertised currently at my local credit union for 2.75% with caveats, but we're expecting to sell our house in the spring, so I haven't bothered trying to juggle the finances around for a lower rate.  We have another heloc on a rental house at 5% or so, but haven't actually used it yet.  Fees were covered by the bank for both.

2) There are two periods to the heloc--- the draw (variable rate, just paying interest on what you've taken out) and the repayment (fixed at whatever the current rate is at, term of 5/10/20 years according to your contract).  Some banks will require you to keep the draw period open for a year or two before you fix it for repayment, although I suppose you could always just pay everything off and just keep the account open with zero balance for that time period if you wanted.  In your example, if you wanted to fix it for repayment after two years, you'd be at 6.15%.

3) I think they took about a month to close.  It might have been faster, and in your case, it seems it could be pretty fast if you can pass everything onto the other banker immediately after the refinance.

Something to add--- you'll get a better rate if your loan to value is below a certain percentage, so there might be a .25% difference between 70% and 80% LTV or 80% to 90% LTV.  I don't remember the numbers exactly, but be sure to ask.  Same with fees--- if the bank can simply order a drive by appraisal rather than full appraisal, which might depend on the LTV, they might be willing to cover more fees.

Something else--- here's the advertisement from my credit union---https://www.freedomfirst.com/home-equity-loans
« Last Edit: November 14, 2020, 03:47:05 PM by uniwelder »

Steeze

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Re: I'm getting my first HELOC on my primary. What to expect?
« Reply #3 on: November 22, 2020, 07:54:02 AM »
I got a HELOC through TD Bank and they gave me a subprime rate. Right now it is 2.74%


joenorm

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Re: I'm getting my first HELOC on my primary. What to expect?
« Reply #4 on: November 26, 2020, 09:04:12 AM »
Why get a HELOC instead of a fixed rate mortgage?

I am asking because I am weighing those two options myself and I don't understand when one is a better option then the other.

thanks

Steeze

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Re: I'm getting my first HELOC on my primary. What to expect?
« Reply #5 on: November 26, 2020, 11:14:56 AM »
Why get a HELOC instead of a fixed rate mortgage?

I am asking because I am weighing those two options myself and I don't understand when one is a better option then the other.

thanks

I went with a HELOC because I didnít want a mortgage on my primary residence. If I use the HELOC it is either as an emergency fund or to buy a rental property. If I buy a rental then I would get a mortgage on that and then pay back my HELOC. Maybe I would consider investing the HELOC in a big downturn, but otherwise I consider it only as a means to buy a rental.

If your only plan was to throw it all in the market and let it ride for the next 30 years then a mortgage makes more sense.

Basically I donít have to use my HELOC right away, so I am not paying interest while I wait for a good multi family deal to come my way. If I got a mortgage then I would be making payment immediately.

Also with the HELOC I am only paying interest for the first 5 years, which is handy for buying another property which I might need to renovate before renting and refinancing.