topic Re: Applied for HELOC yesterday...your experiences please in Community Chat

Penny for your thoughts....

LIG1 — Sun, 10 Jul 2022 17:19:41 GMT

Re: Applied for HELOC yesterday...your experiences please

PinkyPetunia — Wed, 27 Aug 2014 15:33:14 GMT

I had one back in the 1990's when interest rates were sky high so we worked very hard to pay it off fast. We got a statement that there was zero balance due, but it wasn't enough when we went to sell the house in 2005. I needed a certificate or some other document from my lender saying the loan was satisfied.

You do incur closing costs with an HELOC so bear that in mind. Interest rates are low now so that is in your favor. Do you have other savings that could fund the home improvements? Do you think you may have trouble paying off the HELOC? Only you can decide if it makes sense to go forward on it. Good luck.

Re: Applied for HELOC yesterday...your experiences please

Lipstickdiva — Wed, 27 Aug 2014 15:50:09 GMT

I'm not sure what your age is but we are handling an estate right now at work where the husband and wife had a HELOC. He passed away and the bank called the whole thing due even though she continued to make the payments. Luckily she had the money to pay it off.

Re: Applied for HELOC yesterday...your experiences please

madzonie — Wed, 27 Aug 2014 16:54:21 GMT

Sometimes, depending on your lender, there are ZERO costs for opening an equity line of credit. We opened one about 3 years ago with our bank (WF) and we incurred no costs whatsoever.

The only costs would have been a $300 charge if we closed the account within the first 3 years, and any interest we might accrue on a running balance.

We used it to build a shop for hubby, but paid it off right away. It was good to have it so we didn't have to take big chunks right out of our savings. It is still open, but with a zero balance.

Re: Applied for HELOC yesterday...your experiences please

esmeraldagooch — Wed, 27 Aug 2014 17:10:51 GMT

You are playing with fire. Rates can only go up, which could make payments go though the roof. Stop and get a interest rate and lock it in before going any farther. I had relatives who almost lost their home when their variable interest rate hit 21% in the 1980's. They had to sell their home as they couldn't manage the payments which went up hundreds of dollars in a short period of time. The FED can't keep rates low much longer, which is chatted about on many forums and easy to find.

Re: Applied for HELOC yesterday...your experiences please

Irshgrl31201 — Wed, 27 Aug 2014 17:22:33 GMT

No, I would not feel comfortable with that at all.

Re: Applied for HELOC yesterday...your experiences please

gazelle77 — Wed, 27 Aug 2014 17:25:29 GMT

I would not do it unless it was absolutely necessary. What if you or your husband became sick, or died? What if you suddenly could not pay the money back each month?

Re: Applied for HELOC yesterday...your experiences please

KathyPet — Wed, 27 Aug 2014 17:28:48 GMT

What is the variable rate based on??? This is the most important factor. There are multiple indicators that the rate can be based on. Find out what They are using and then do some on line research to,find out how that rate has varied over the last few years to see what your upper and lower rate could be.

Re: Applied for HELOC yesterday...your experiences please

esmerelda — Wed, 27 Aug 2014 18:52:59 GMT

I had the same fearful feelings many, many, MANY years ago when we got one. House on the line...horrors!

Relax. You're responsible, or you wouldn't be getting the loan.

Having the fix option is good thinking!

Re: Applied for HELOC yesterday...your experiences please

esmerelda — Wed, 27 Aug 2014 20:22:26 GMT

On 8/27/2014 bluegrassbaby said:
On 8/27/2014 KathyPet said: What is the variable rate based on??? This is the most important factor. There are multiple indicators that the rate can be based on. Find out what They are using and then do some on line research to,find out how that rate has varied over the last few years to see what your upper and lower rate could be.

Since your post I've rechecked every figure and feel confident about the rate...I've been checking daily for months and months. The loop hole that bothers me more than DH is the bank wanting payment in full if something happened to one of us. I can't seem to get a concrete answer on this from anyone at this point.

See if you can pin them down on that payment point. Have them show it to you...yes or no...in writing. Or get "no" in writing. Or if you both don't already have life insurance, get term insurance for both of you.

Re: Applied for HELOC yesterday...your experiences please

madzonie — Wed, 27 Aug 2014 20:27:38 GMT

On 8/27/2014 bluegrassbaby said:
madzonie: We have checked around and didn't find a bank that could beat the offer we currently have...also we don't want to take out of our savings either. It seems like once you start nibbling at a savings it never stops. I think our major concern is if DH was to pass away that I would have to repay the entire loan immediately. Thank you for your thoughts.

bluegrassbaby - I know this is probably a very delicate subject and I'm not asking for answers - just putting some thoughts out here.

Have you thought of taking out a life insurance policy that would pay off the loan should you be left alone?

Not sure of your ages, the amount you want to borrow, how much a policy would cost, or if you already have insurance, etc. But it's just a thought if you're particularly concerned about being left with a large debt to pay. Good luck with your project!

Re: Applied for HELOC yesterday...your experiences please

madcity411 — Wed, 27 Aug 2014 22:43:40 GMT

On 8/27/2014 esmeraldagooch said:
You are playing with fire. Rates can only go up, which could make payments go though the roof. Stop and get a interest rate and lock it in before going any farther. I had relatives who almost lost their home when their variable interest rate hit 21% in the 1980's. They had to sell their home as they couldn't manage the payments which went up hundreds of dollars in a short period of time. The FED can't keep rates low much longer, which is chatted about on many forums and easy to find.

Yeah and CD's for savers were in the double digits too! Not always a totally bad thing.

Re: Applied for HELOC yesterday...your experiences please

LaterGator — Wed, 27 Aug 2014 23:08:10 GMT

In the 90's I was an underwriter. I believe there is a law that the interest rate, although variable, cannot climb more than 10% on the loan if I'm remembering correctly. So if you start out with 2.5% you'll never go above 12.5%. And, if that rates go that high that quickly, we're all in trouble. Please ask your banker. There are many laws they don't tell you about unless you ask because there are so many.

Re: Applied for HELOC yesterday...your experiences please

151949 — Wed, 27 Aug 2014 23:20:04 GMT

Last summer our saving investments made a profit that was enough for us to purchase a brand new large camper. When DH called our finance guy he suggested we do a HELOC instead as he felt he could make more with the money than we would have to pay in interest. We trusted him and when we got the LOC our interest rate is only 2.5% - so we are , in fact, making way more by leaving the money invested than it is costing us to carry the LOC.We have already paid off 1/3 of it. plus in the case we would have some need for fast money - an emergency- we could tap that line instantly. Say , for instance, if the furnace went out and needed replaced, something major like that.I don't think this is something I would do just to pay for things I want but for needs- it is a good way to go.

Re: Applied for HELOC yesterday...your experiences please

151949 — Wed, 27 Aug 2014 23:22:13 GMT

On 8/27/2014 LaterGator said:
In the 90's I was an underwriter. I believe there is a law that the interest rate, although variable, cannot climb more than 10% on the loan if I'm remembering correctly. So if you start out with 2.5% you'll never go above 12.5%. And, if that rates go that high that quickly, we're all in trouble. Please ask your banker. There are many laws they don't tell you about unless you ask because there are so many.

I do recall the banker explaining the variable rate to us and also explaining that how much it can be raised has a cap.

Re: Applied for HELOC yesterday...your experiences please

magicmoodz — Wed, 27 Aug 2014 23:37:35 GMT

This is a timely thread. We are contemplating doing some home improvements and rather than using savings, I have been looking for some low interest money. I contacted our city and they have a number of different loans. I think the only one we could utilize would be 5.99% if there are no income limitations and we aren't disqualified for not living in a neighborhood in desperate need of renovation/revitalization.

I checked with our credit union and home improvement loans come with a 8.25% interest price tag.

We do have a high line of credit that has had a zero balance for several years. I will look into what the current rate is. I guess if interest rates soared, we could pay it off and it would be the same as using savings.

Re: Applied for HELOC yesterday...your experiences please

Lynnj — Wed, 27 Aug 2014 23:46:48 GMT

I had one on my house that had a 15 year drawing period. I forget what the payback period was. My drawing period just ended recently, and the loan in now fully closed. I used the money in the beginning for home repair and did a kitchen remodel with it too. I had no problem making payments, and eventually paid off the balance within a few years. One of the benefits to a HELOC is that you will be able to write off your interest charged on your taxes, just as you would write off mortgage interest. This feature actually makes the HELOC as a loan approach a better deal than taking out a traditional loan or using credit cards. If you feel comfortable in the ability to making payments for what you borrow off of the HELOC, then I wouldn't worry about it at all.

Re: Applied for HELOC yesterday...your experiences please

esmerelda — Thu, 28 Aug 2014 01:01:17 GMT

On 8/27/2014 magicmoodz said:
This is a timely thread. We are contemplating doing some home improvements and rather than using savings, I have been looking for some low interest money. I contacted our city and they have a number of different loans. I think the only one we could utilize would be 5.99% if there are no income limitations and we aren't disqualified for not living in a neighborhood in desperate need of renovation/revitalization.

I checked with our credit union and home improvement loans come with a 8.25% interest price tag.

We do have a high line of credit that has had a zero balance for several years. I will look into what the current rate is. I guess if interest rates soared, we could pay it off and it would be the same as using savings.

Don't confuse a HELOC (home equity line of credit) with a home equity loan. As I understand it, with a home equity loan you make payments on the entire amount. With a HELOC you draw when you need it and only make payments on what you've drawn.

If the home equity loan (or home improvement loan) is for say $50K, you're paying interest on the whole $50K. With a HELOC of $50K, if you've only taken out $10K, that's all you're paying interest on.

Re: Applied for HELOC yesterday...your experiences please

september — Thu, 28 Aug 2014 01:21:15 GMT

We're now on our third HELOC. I don't see a down side to having one. We've used ours to make home improvements, expand our business, and have had it available for unexpected expenses, like needing a new furnace. We don't have a balance at this time, but it gives me peace of mind knowing that we're ready for emergencies.