Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Home Equity Line of Credit
Old 03-09-2013, 06:18 PM   #1
Recycles dryer sheets
 
Join Date: Feb 2010
Posts: 396
Home Equity Line of Credit

I recently became a homeowner. I was also recently told that my job would be relocating in about 1.75 years to North Carolina. I do not plan on moving. I have savings and investments, and I hope I will not need to tap into them after the current job relocates. A friend of mine mentioned that I should look into a home equity line of credit. He said I would be more likely eligible while gainfully employed.

I did a refinance with cash out with Pen Fed. I did that because I am buying out my siblings interests in the family home. It's kind of like a mortgage for me. So I looked on Pen Fed's website to find out about HELOCS. They seem to have a traditional HELOC and a 5/5. I am not sure of the difference and which would be better for me. I think it may have something to do with interest rate movement. I am not sure if either or both have annual fees.

I want the HELOC for insurance, I don't intend on using the money, but I think it would be good to have access to it. Which product would be better for me? Thanks for your advice.
__________________

__________________
nico08 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-09-2013, 10:39 PM   #2
Full time employment: Posting here.
HawkeyeNFO's Avatar
 
Join Date: Jan 2010
Location: Inside the Beltway
Posts: 573
I'm a PenFed customer too. Similar questions as you.
__________________

__________________
HawkeyeNFO is offline   Reply With Quote
Old 03-10-2013, 07:43 AM   #3
Recycles dryer sheets
 
Join Date: Feb 2010
Posts: 396
Hi HawkeyeNFO:

There must be a way for us to figure out the pros and cons of these two types of financial products.

I haven't called PenFed's customer service line yet, I was hoping to be able to just move forward with the on-line application.
__________________
nico08 is offline   Reply With Quote
Old 03-10-2013, 08:57 AM   #4
Recycles dryer sheets
 
Join Date: Feb 2010
Posts: 396
Hi. Pen Fed is open on Sunday. I went through the application process over the phone. There is no annual fee for either type of product. I believe the 5/5 is a better product because you are locking into a low interest rate for 5 years and there is no additional cost connected to that guaranteed rate. The traditional HELOC rate can change quarterly. If an appraisal of your property is necessary, you pay for it and it costs about 200-400$. And I think with the 5/5, if you close the account before 3 years, then you pay the closing costs. So, if you planned on moving or filing bankruptcy in the next 3 years, then you may not want the line of credit. I think for the traditional HELOC, you need to keep it open for 2 years.
__________________
nico08 is offline   Reply With Quote
Old 03-10-2013, 11:18 AM   #5
Thinks s/he gets paid by the post
MooreBonds's Avatar
 
Join Date: Aug 2004
Location: St. Louis
Posts: 2,091
Quote:
Originally Posted by nico08 View Post
I want the HELOC for insurance, I don't intend on using the money, but I think it would be good to have access to it. Which product would be better for me? Thanks for your advice.
It's not clear from your post on what your exact plans are on the financing...but I recently refi-ed my 5/5 ARM from PenFed into their 5 year HELOC (will have the house paid off in 5 years). It's just 1.99%, with no fees whatsoever - and if your Loan-to-Value is less than 70%, you can even ask that they do away with the $300 appraisal to make it truly no cost.

However, if you aren't sure you're going to draw on the money, or will take longer than 5 years to pay it off, then it's a different story.

The reason I did a 5 year HELOC instead of plowing the funds into the market is that my original long term goal is to move or build my dream home in about 10 years, so a traditional 30 year mortgage to take advantage of the super low 30 year rates won't really pay off....
__________________
Dryer sheets Schmyer sheets
MooreBonds is offline   Reply With Quote
Old 03-10-2013, 11:28 AM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Amethyst's Avatar
 
Join Date: Dec 2008
Posts: 5,900
I've never had a HELOC and am a bit confused by the "different story" comment.

Isn't the whole point of a HELOC that you pay nothing if you don't use the funds? Then again, that sounds too good to be true.

For example - and I think this is relevant to OP's concerns even though OP is still working- I am thinking of taking out a large HELOC when I retire, in case it becomes harder to get a loan afterward. Does that make sense?

Amethyst

Quote:
Originally Posted by MooreBonds View Post
It's not clear from your post on what your exact plans are on the financing...but I recently refi-ed my 5/5 ARM from PenFed into their 5 year HELOC (will have the house paid off in 5 years). It's just 1.99%, with no fees whatsoever - and if your Loan-to-Value is less than 70%, you can even ask that they do away with the $300 appraisal to make it truly no cost.

However, if you aren't sure you're going to draw on the money, or will take longer than 5 years to pay it off, then it's a different story.
.
__________________
If you understood everything I say, you'd be me ~ Miles Davis
'There is only one success to be able to spend your life in your own way. Christopher Morley.
Amethyst is offline   Reply With Quote
Old 03-10-2013, 12:08 PM   #7
Recycles dryer sheets
Felix Mulier's Avatar
 
Join Date: Feb 2013
Posts: 99
Quote:
Originally Posted by nico08 View Post
I recently became a homeowner. I was also recently told that my job would be relocating in about 1.75 years to North Carolina. I do not plan on moving.

A friend of mine mentioned that I should look into a home equity line of credit. He said I would be more likely eligible while gainfully employed.
Personally, I stay away from any debt (or investment for that matter) that I don't understand and don't know exactly what I'm doing and why. Your post left me thinking you're not dealing from your strengths here. There is a lot of instability in your life right now - I recommend doing thorough research on your options, not just take the advice of an albeit well-intentioned friend. Your post here is a good start. Best of luck.
__________________
I generally avoid temptation unless I can't resist it.

Felix

Felix Mulier is offline   Reply With Quote
Old 03-10-2013, 06:45 PM   #8
Thinks s/he gets paid by the post
MooreBonds's Avatar
 
Join Date: Aug 2004
Location: St. Louis
Posts: 2,091
Quote:
Originally Posted by Amethyst View Post
I've never had a HELOC and am a bit confused by the "different story" comment.

Isn't the whole point of a HELOC that you pay nothing if you don't use the funds? Then again, that sounds too good to be true.
Ah....perhaps I was a little confused as well. I guess I read HELOC, but was thinking "home equity loan". And then when they mentioned "traditional HELOC and 5/5", my brain started to think of their 5/5 ARM and Home Equity Loans.

My 2 cups of coffee were still in my stomach, and the caffeine hadn't yet reached my brain.
__________________
Dryer sheets Schmyer sheets
MooreBonds is offline   Reply With Quote
Old 03-10-2013, 07:00 PM   #9
Recycles dryer sheets
 
Join Date: Feb 2010
Posts: 396
Hi. Yes, there is a distinction between a home equity loan and a home equity line of credit. With the loan, you actually take the money from the onset. With the line of credit, it gives you the ability, if and when you need to access money from the equity that has built up in your home.

I would get the home equity line of credit so that, if I was unable to find a job for longer than expected, had a health problem, or had some other sizeable and unpredictable cost that had to be paid immediately, I could pull the money from the line of credit.

I understand that banks are more willing to issue a line of credit while you are gainfully employed. And since I may be out of a job in a couple of years, I thought it made sense to get the line of credit now.

Based on the banks equation, I am only eligible for about $32,000 as a line of credit. But access to that money could help if I needed it.
__________________

__________________
nico08 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 10:59 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.