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Hi - I'm looking to do renovation/ addition to my primary residence. I would like to borrow $100k. My credit is excellent and I have between $400k-$500k equity, according to Zillow/ Redfin, which I know aren't appraisals, but just for some context. I do not want to refinance my current mortgage ($400k balance), as I have a 2.6% interest rate currently.
Would a HELOC be the best tool for me? Any recommendations as where the best rates are? What should I be expecting for a good rate? Are their closing costs and potential points associated with a HELOC, like a refinance?
Would a HELOC be the best tool for me? Any recommendations as where the best rates are? What should I be expecting for a good rate? Are their closing costs and potential points associated with a HELOC, like a refinance?
Do HELOCs typically have pre-payment penalties?
You may get some speculation here but it would be useless to you.
The place to ask those questions as at the lender from whom you intend to borrow the money.
You may get some speculation here but it would be useless to you.
The place to ask those questions as at the lender from whom you intend to borrow the money.
That's 100% true. But a little guidance/information is what forums are for.
Generally:
HELOC's have no prepayment penalty because they have no due date (yeah, yeah, I know after ten years the payback agreement changes.)
Closing costs should be minimal - maybe a couple of hundred bucks. You MAY be required to get an appraisal and you will pay for it. I've never even heard of points on a HELOC. The rate is usually (always?) a variable rate based on an index. You may be required to pay an annual fee whether you use the HELOC or not (ours has been $50 for every one we've ever had).
I've usually found the lowest rates and costs with a credit union. But just like a mortgage, shop around a little. Remember, this is going to be recorded as a second line on your house - your homeowners insurance will be advised about it.
Should you get one for your purposes is an opinion based on personal finances and preferences. I'll offer no thoughts on that.
And before anybody starts to 'correct' me. Note that I've repeatedly used the words generally and usually.
That's 100% true. But a little guidance/information is what forums are for.
Generally:
HELOC's have no prepayment penalty because they have no due date (yeah, yeah, I know after ten years the payback agreement changes.)
Closing costs should be minimal - maybe a couple of hundred bucks. You MAY be required to get an appraisal and you will pay for it. I've never even heard of points on a HELOC. The rate is usually (always?) a variable rate based on an index. You may be required to pay an annual fee whether you use the HELOC or not (ours has been $50 for every one we've ever had).
I've usually found the lowest rates and costs with a credit union. But just like a mortgage, shop around a little. Remember, this is going to be recorded as a second line on your house - your homeowners insurance will be advised about it.
Should you get one for your purposes is an opinion based on personal finances and preferences. I'll offer no thoughts on that.
And before anybody starts to 'correct' me. Note that I've repeatedly used the words generally and usually.
Well, thank you very much. Your general guidance is exactly what I was looking for and will help me with specific questions for a lender. I am a member of a credit union, so I will start there.
Hi - I'm looking to do renovation/ addition to my primary residence. I would like to borrow $100k. My credit is excellent and I have between $400k-$500k equity, according to Zillow/ Redfin, which I know aren't appraisals, but just for some context. I do not want to refinance my current mortgage ($400k balance), as I have a 2.6% interest rate currently.
Would a HELOC be the best tool for me? Any recommendations as where the best rates are? What should I be expecting for a good rate? Are their closing costs and potential points associated with a HELOC, like a refinance?
Do HELOCs typically have pre-payment penalties?
I've used a HELOC on several occasions when I didn't want to sell a property or cash in some stocks/equities to raise the needed funds for another property. However, this was when interest rates were a lot lower.
HELOC's can still be a good deal for short term funds, but you need to consider your overall financial situation. What other payments are you making? Cars? Boats?
Also, what if the market value of your house were to DECREASE in the coming year or so? Increasing your debt level might not be a great idea unless you have some "slack" in your budget.
Bottom line, it depends on more than just an interest rate.
Questions to ask:
What are the rates for different combined loan to values?
How are the rates determined?
Is the payback interest only or amortized? If amortized, over what period?
When the draw is over, what is the payback term?
(Most are 15 or 20 years)
How do you determine value?
How often does rate change and how is rate determined?
Who pays closing costs? Are there prepayment penalties?
What is your processing time?
I spent a few hours yesterday shopping HELOCs (trying to find our company's sweet spot for marketing). Credit unions have the banks beat unless you have the ability to park 100K in an account and set up auto debit payments.
Don't get bogged down shopping rates. Almost all are variables tied to prime. Concentrate more on the repayment amortization period. Once you make up your mind, get it done. We are in an environment where loan products come and go, and without notice.
Questions to ask:
What are the rates for different combined loan to values?
How are the rates determined?
Is the payback interest only or amortized? If amortized, over what period?
When the draw is over, what is the payback term?
(Most are 15 or 20 years)
How do you determine value?
How often does rate change and how is rate determined?
Who pays closing costs? Are there prepayment penalties?
What is your processing time?
I spent a few hours yesterday shopping HELOCs (trying to find our company's sweet spot for marketing). Credit unions have the banks beat unless you have the ability to park 100K in an account and set up auto debit payments.
Don't get bogged down shopping rates. Almost all are variables tied to prime. Concentrate more on the repayment amortization period. Once you make up your mind, get it done. We are in an environment where loan products come and go, and without notice.
Hi - I'm looking to do renovation/ addition to my primary residence. I would like to borrow $100k. My credit is excellent and I have between $400k-$500k equity, according to Zillow/ Redfin, which I know aren't appraisals, but just for some context. I do not want to refinance my current mortgage ($400k balance), as I have a 2.6% interest rate currently.
Would a HELOC be the best tool for me? Any recommendations as where the best rates are? What should I be expecting for a good rate? Are their closing costs and potential points associated with a HELOC, like a refinance?
Do HELOCs typically have pre-payment penalties?
Here are some direct answers based on MY experience:
Would a HELOC be the best tool for me? Probably.
Any recommendations as where the best rates are? The rates are typically "floating" and not fixed. Rates can and often do change monthly.
Are their closing costs and potential points associated with a HELOC, like a refinance? Closing costs are usually quite low with a HELOC compared to a conventional loan.
Do HELOCs typically have pre-payment penalties? NO. There is no fixed payment plan. As long as you pay the interest each month, they don't care if it takes you 10 years to pay it off.
Also, depending on the contractor you use, they may have their own financing at better rates. That may cover part of your renovations.
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