HELOCs
- Thread starter Ethan
- Start date
Not to divert traffic elsewhere, but FWF has a decent thread. Not much heat in it since the lending rules were tightened a few years ago, but you can still get prime or prime minus a bit. Hanscom comes up the most.
http://www.fatwallet.com/forums/finance/150875/
The downside for HELOC for school is likely going to be that the rates are variable and tied to prime. Probably less than prevailing student loan rates since they are secured assuming your LTV is low enough.
Last summer I took out my small remaining mortgage with a HELOC. A lot of small local lenders by me have 12 month teaser rates of 1.99 or 2.49. One has 1.72. After the time is up they flip to prime +.25 or .50. My plan is to pay it off (or substantially so) in the teaser period, then have the line in place as a "nuclear" emergency fund.
http://www.fatwallet.com/forums/finance/150875/
The downside for HELOC for school is likely going to be that the rates are variable and tied to prime. Probably less than prevailing student loan rates since they are secured assuming your LTV is low enough.
Last summer I took out my small remaining mortgage with a HELOC. A lot of small local lenders by me have 12 month teaser rates of 1.99 or 2.49. One has 1.72. After the time is up they flip to prime +.25 or .50. My plan is to pay it off (or substantially so) in the teaser period, then have the line in place as a "nuclear" emergency fund.
Thanks for the reply Sesq. I've been speaking with my local bank about it. Initially I asked about borrowing money to purchase a used car, and after discussing the parameters of an actual car loan, we came around to their version of a HELOC (at least in my understanding it is their HELOC. It is Keybank, and they call it KEO (Key Equity Options)). It seemed like it might be my best option for borrowing longer than a balance transfer would allow. I haven't put in an application, but the banker keeps referring to prime + 0% for the rate, they have a $100 yearly fee for access to it, which they said could most likely be waived for the first year.
I've been trying to do some research on the the topic, and am a little confused as to the difference between a Home Equity Line of Credit (HELOC) and a Home Equity Loan. One thing I read seemed to indicate that you were only able to pay the interest on the amount you used for a certain period (10 years in that case), at which point you had to start paying the principle on what you borrowed. I didn't like those terms very much, as I'd like to pay both principle and interest back in relatively short periods of time. 5 years at the most.
Any insight?
I've been trying to do some research on the the topic, and am a little confused as to the difference between a Home Equity Line of Credit (HELOC) and a Home Equity Loan. One thing I read seemed to indicate that you were only able to pay the interest on the amount you used for a certain period (10 years in that case), at which point you had to start paying the principle on what you borrowed. I didn't like those terms very much, as I'd like to pay both principle and interest back in relatively short periods of time. 5 years at the most.
Any insight?
You should be able to get prime - 1/4 or something right now (at least for year one) maybe better deals out there. I think that @InstinctX got that rate with some piddly little bank?
EG: HELOC with 25K but you don't actually use it at say 1.99% = Zero interest for the year
EG HEL for 25K at 1.99% = $500 in interest in the year because you are paying on the loan
HELOCs come with a checkbook, and you use it like a checking account. If you draw only $5K from your $25K loan you would pay interest only on the $5K, and you would stop paying interest when you pay it off, just like a CC (IE you can do that many times)
HELOCs often have a draw down period and a payback period. This means in the draw down period, perhaps the first 36-60mths depending on the terms you can take from the HELOC (and pay it off) as much as your limits allow, but when that ends and it is pay back, it basically becomes a HEL and you must pay it back.
Lenders hope you draw as much as possible during the drawdown period so you get into debt, then they stop you borrowing and start getting the nice regular payments from you.
Don't forget that HELOCs typically are variable APRs so watch out for interest rate fluctuations (perhaps not a huge risk at this time, but worth considering)
- HELOC is a HE Line of Credit
- HEL is HE Loan
EG: HELOC with 25K but you don't actually use it at say 1.99% = Zero interest for the year
EG HEL for 25K at 1.99% = $500 in interest in the year because you are paying on the loan
HELOCs come with a checkbook, and you use it like a checking account. If you draw only $5K from your $25K loan you would pay interest only on the $5K, and you would stop paying interest when you pay it off, just like a CC (IE you can do that many times)
HELOCs often have a draw down period and a payback period. This means in the draw down period, perhaps the first 36-60mths depending on the terms you can take from the HELOC (and pay it off) as much as your limits allow, but when that ends and it is pay back, it basically becomes a HEL and you must pay it back.
Lenders hope you draw as much as possible during the drawdown period so you get into debt, then they stop you borrowing and start getting the nice regular payments from you.
Don't forget that HELOCs typically are variable APRs so watch out for interest rate fluctuations (perhaps not a huge risk at this time, but worth considering)
Yeah, worth confirming.
InstinctX
Level 2 Member
I received an insane rate of prime - 1.25% for a period of 10 years... but that was before the housing bubble when lenders required little, if any, documentation of income, etc. I don't recall how I found the lender -- but many at that time were offering similar and competitive rates. I was looking for a HELOC for house renovations. I did a refi about 3 years ago, and rolled that into my new loan.
But I have used my HELOC to fund IRA's and buy stocks (this is not for the risk adverse).
Whenever I'm in a bank branch at Bank XYZ, there's always a banker that wants me open up a HELOC with them. I was annoyed by one bank, that one day I said, sure...if you can match the same terms. When I provided them the loan documents, that shut them up.
Things to consider: are there fees for paying off your balance early? Is there an annual fee when you have a zero balance (I had the lender include a rider to exempt me from their $100 annual fee if I had a $0 balance during the drawdown period).
I had a couple of friends read through the loan documents, to make sure I read the repayment terms correctly: Once I enter the repayment period, I'll be required to pay principal payments plus any accrued interest -- with interest based on the monthly published prime rate minus 1.25%
Of course, the prime rate will eventually increase...
The benefits of a HELOC is you can claim it as a deduction, helping to lower your effective tax rate.
But I have used my HELOC to fund IRA's and buy stocks (this is not for the risk adverse).
Whenever I'm in a bank branch at Bank XYZ, there's always a banker that wants me open up a HELOC with them. I was annoyed by one bank, that one day I said, sure...if you can match the same terms. When I provided them the loan documents, that shut them up.
Things to consider: are there fees for paying off your balance early? Is there an annual fee when you have a zero balance (I had the lender include a rider to exempt me from their $100 annual fee if I had a $0 balance during the drawdown period).
I had a couple of friends read through the loan documents, to make sure I read the repayment terms correctly: Once I enter the repayment period, I'll be required to pay principal payments plus any accrued interest -- with interest based on the monthly published prime rate minus 1.25%
Of course, the prime rate will eventually increase... The benefits of a HELOC is you can claim it as a deduction, helping to lower your effective tax rate.
Thanks InstinctX. There is an annual fee for a zero balance, $100. They did say they'd likely be able to waive that for the first year. I'm in a position where I was recently laid off, and am considering returning to school. This seemed like an option for a low rate on a loan. The banker did say that when I take money out of the credit line, it is locked in at whatever rate I take it at, which is nice and I don't think is true of all HELOCs (at least in my research).
I wouldn't pay a fee unless the rate was great.
I think your big issue to qualify is your lack of income. Do you have a spouse that is employed?
You can pay principal during the draw period of the HELOC. My balance tends to bounce up and down as I will apply spare cash against it, even if I may have to pull it back out in a month or so.
I think your big issue to qualify is your lack of income. Do you have a spouse that is employed?
You can pay principal during the draw period of the HELOC. My balance tends to bounce up and down as I will apply spare cash against it, even if I may have to pull it back out in a month or so.