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Old 01-22-2012, 09:13 PM   #21
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I have a Pen Fed HELOC (variably rate line, not fixed rate loan). I have had it a few years at least. Very useful to fund fluctuations and settlements in investments. Won't use it much when rates go back up, though.

Never had to pay anything but the interest monthly. Are you talking about a home equity loan instead of a HELOC?
Nope. Last I looked, this was their current terms on their lines of credit.
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Old 01-22-2012, 10:33 PM   #22
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Nope. Last I looked, this was their current terms on their lines of credit.
I'm going to have to sit down with a calculator & calendar to check, but it looks like they're still just charging me 2.75% APY.

I haven't dug up my terms, either, but I'm pretty sure the 2% payback wasn't due until after the 10-year draw was over. Not that I plan to wait until then to find out.

It's all too easy to believe that the 2%-every-month term came about in early 2009...
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Old 01-23-2012, 10:26 AM   #23
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I'm going to have to sit down with a calculator & calendar to check, but it looks like they're still just charging me 2.75% APY.

I haven't dug up my terms, either, but I'm pretty sure the 2% payback wasn't due until after the 10-year draw was over. Not that I plan to wait until then to find out.

It's all too easy to believe that the 2%-every-month term came about in early 2009...
They probably have fiddled with terms and conditions a number of times. Here is the current language straight from the horse's website:

"Repayment will be the greater of 1 % of principal balance outstanding (2% for the 5/5 ELOC), $100, or the finance charge due."
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Old 01-23-2012, 11:52 AM   #24
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Get a HELOC before you retire. I have two clients that can't jump on some RE at ridiculously low prices because they don't want to liquidate investments to purchase it. Both are retired and wish they had gotten HELOCS because their houses have been paid off for a long time.

Also could help with unforeseen medical bills, etc.........
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Old 01-23-2012, 08:03 PM   #25
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They probably have fiddled with terms and conditions a number of times. Here is the current language straight from the horse's website:
"Repayment will be the greater of 1 % of principal balance outstanding (2% for the 5/5 ELOC), $100, or the finance charge due."
Painful. And only the interest can be deducted on taxes.

If I want to pay back 1.5-2% every month then I guess I have to borrow 105-110% of what I really need...
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Old 01-24-2012, 08:19 AM   #26
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Now I'm confused....how does this work and how is it calculated. Is this during the draw down period or the loan repayment period?
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Old 01-24-2012, 09:49 AM   #27
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Thanks for everyone's post.

It looks like a overwhelming yes....now I will have to investigate the details and do the shopping. What are the costs, do they cancel the line in a certain amount of time if not used, if you cancel the HELOC do they charge, do you do business with your local bank or go online? etc.

Interesting that a couple of folks referenced PENFED. Why?

Thanks again!
I opened one a few months ago. I agree you should do it, but with a caveat. I would not charge anything that you could not pay off in a short time, such as a year. Why? interest rate is floating...and can rise rapidly. Many comments have used the words "low interest" loan...but it may end up not being "low" in a year or two.

As for watchouts....

Mine requires that I use it at least once a year.
I had to pay a small fee to set it up. That fee is refundable to me if I keep the line open for at least 2 years. An appraisal may also be required.
My line will only stay available for 7 years.
If you use it to pay off your house, check to make sure you won't lose your homestead exemption...you probably won't since the HELOC will hold a lien on your house...but check to be sure.
Ask about the rate rules. For example, if you borrow $50k at 3%, and the rate goes up to 4%, does that rate apply to only NEW borrowings? or even the $50k you already borrowed?
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Old 01-24-2012, 09:56 AM   #28
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Now I'm confused....how does this work and how is it calculated. Is this during the draw down period or the loan repayment period?
It's during the loan repayment period. If you borrow $100k, and your HELOC has the 2% clause...you'd have to pay a minimum of $2k the first month.

Mine has a clause like this...can't recall if it's 2% though....I think ours may be 1%. Doesn't bother me...I want to pay back in about 3 years anyway (use mine to buy rentals)...so we pay very aggressively.
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Old 01-24-2012, 09:59 AM   #29
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by the way, someone said you should not have to pay ANY fee for a HELOC...as then you're paying to lend them money. I disagree. What you're paying for is the cost to set up the HELOC...there is an administrative fee. A bank has two choices. They can add that cost into their overhead, thereby increasing the rate slightly...or they can charge it as a separate fee. For mine, it was $300, but is refundable if we use the line for 1 year.....so essentially they are guaranteeing they get their money one way or the other.

If they did not do something similar, there would be the risk that thousands of people would open HELOCs and never use them...thus putting them through a lot of costly work for no payoff.
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Old 01-24-2012, 11:19 AM   #30
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Thanks Finance Dave,

I have definitely learned a lot from folks like you who have already experienced the "in-n-outs" of HELOCs....and that's what I needed.
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Old 01-24-2012, 01:20 PM   #31
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I opened one a few months ago. I agree you should do it, but with a caveat. I would not charge anything that you could not pay off in a short time, such as a year. Why? interest rate is floating...and can rise rapidly. Many comments have used the words "low interest" loan...but it may end up not being "low" in a year or two.
The interest rate uncertainty risk is one reason I like the Penfed 5/5 ARM HELOC. You know what you are paying for 5 years, and what the maximum you will be paying in subsequent five year periods so you can plan and act accordingly. But in general I agree - incurring a lot of debt on a variable rate loan that can change monthly or quarterly could leave you paying a lot of interest if rates shoot up rapidly.
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Old 01-24-2012, 02:46 PM   #32
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My home ownership is sacred to me. A HELOC puts a lien on my home. Why would I put up a $400,000 collateral for a loan of as little as a few dollars? Too many times "chit happens" with paperwork to risk saving a few bucks on a short term interest rate....
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Old 01-24-2012, 09:28 PM   #33
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I have a HELOC I took out just before I retired 4 years ago for $100K about 25% of the value of my house. It gets automatically renewed every 5 years if I don't cancel it. The loan is from my old work credit union and does not have as good a rate as the Penfed discussed in this thread. I took out the loan for possible emergencies and possible expenses for younger son who is finishing college this year. Nice to have as a resource. Only used it once in buying a travel trailer, let me close the deal for cash and paid it off in less than a year. I have thought I might use it if I wanted to buy a car for cash and it might take too long to liquidate equities in my trading account.
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Old 01-24-2012, 10:28 PM   #34
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My home ownership is sacred to me. A HELOC puts a lien on my home. Why would I put up a $400,000 collateral for a loan of as little as a few dollars? Too many times "chit happens" with paperwork to risk saving a few bucks on a short term interest rate....
To you it may be sacred, to someone else it's just dead equity.

To be punctiliously correct, you're not risking $400K of collateral unless you have a $400K HELOC and write a $400K check on it. You're only giving them a lien at the country record for the HELOC, and there's only collateral at risk if you draw on it.

In other words, except for the lien part, it's like a credit card. You only take on as much debt as you're willing to handle. Except this particular emergency fund has a much lower interest rate.

Your reasons for not having a HELOC are different from someone else's reasons for getting a HELOC. They're just different reasons, and neither reason is "better" than the other.
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Old 01-25-2012, 09:23 PM   #35
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To you it may be sacred, to someone else it's just dead equity.

To be punctiliously correct, you're not risking $400K of collateral unless you have a $400K HELOC and write a $400K check on it. You're only giving them a lien at the country record for the HELOC, and there's only collateral at risk if you draw on it.

In other words, except for the lien part, it's like a credit card. You only take on as much debt as you're willing to handle. Except this particular emergency fund has a much lower interest rate.

Your reasons for not having a HELOC are different from someone else's reasons for getting a HELOC. They're just different reasons, and neither reason is "better" than the other.
I have to agree. A free and clear property puts a target on your back for unscrupulous attorneys and fortune seekers at your loss, i would recommend looking to lien all properties even just with a separate company that you own that is not the company that owns the property. If you are going to doit, do it right make regular payment , have a note, file taxes ect. From my experience it is worth it.
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Old 01-25-2012, 09:26 PM   #36
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...i would recommend looking to lien all properties even just with a separate company that you own that is not the company that owns the property. If you are going to doit, do it right make regular payment , have a note, file taxes ect. From my experience it is worth it.
Sounds like a lot of trouble. What is your experience?
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Old 01-25-2012, 10:33 PM   #37
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Sounds like a lot of trouble. What is your experience?
Fraudulent claims, workers, slip and fall, law suits, I have seen it all either directly, clients or friends. I have a friend that a kid got his eye poked out form icicle. Sad no question. But there is no way for an object above your head to injure your eye unless you are looking up at it and ben directly under it. There is no question in my mind the kid was knocking them down for fun and looking up at them. Insurance paid for medical but the unscrupulous attorneys went after everything until they realize it was fully encumbered and then they settled with insurance.
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Old 01-25-2012, 11:18 PM   #38
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I have to agree. A free and clear property puts a target on your back for unscrupulous attorneys and fortune seekers at your loss, i would recommend looking to lien all properties even just with a separate company that you own that is not the company that owns the property. If you are going to doit, do it right make regular payment , have a note, file taxes ect. From my experience it is worth it.
In my case, I had my estate planning attorney put my house title in my trust. The trust owns the house, not me. A primary reason is so that I can not loose my house to some liability law suit. I've got most all my large assets in the trust fund. This also makes it easier to transfer if something should ever happen to me. Also, I couldn't be forced to liquidate the asset for any personal debt I might incur. I can still get a HELOC against the house as well if I chose to.
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Old 01-25-2012, 11:31 PM   #39
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Any of you attorneys on the board care to weigh in on the ability to pierce a trust set up for these purposes?
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Old 01-26-2012, 12:03 AM   #40
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The interest rate uncertainty risk is one reason I like the Penfed 5/5 ARM HELOC. You know what you are paying for 5 years, and what the maximum you will be paying in subsequent five year periods so you can plan and act accordingly. But in general I agree - incurring a lot of debt on a variable rate loan that can change monthly or quarterly could leave you paying a lot of interest if rates shoot up rapidly.
I think this is the reason to only go with Penfed for a 5/5 HELOC and not for their standard HELOC. Their standard HELOC looks like it has a 1.5% min payment (P+I) and their 5/5 HELOC has 2% min payment. Their standard HELOC rates can be matched or beaten, so it's not worth the 1.5% min payment to do it. A 5-year fixed rate LOC at these low rates is a steal!

We closed our 5/5 HELOC when we refi'd. As soon as our new loan closed (not with Penfed), I opened up a 5/5 HELOC with them. The only difference was that our new HELOC is only for 50K since that's the max that I can open without paying for an appraisal (regardless of what your LTV is).
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