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Old 10-01-2014, 09:18 PM   #21
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After reading some advice about HELOCs here earlier this year, I opened one a few months ago, before my ER last month. It is interest only, with a $20 annual fee after the first year. Though I have not tapped it yet, I anticipate using some of it to fund a few house projects before we sell and move to our retirement location. The balance would then be paid off by the sale proceeds. I am also contemplating using some of it for living expenses before the move, which should allow me to increase Roth conversion amounts. Since our destination location has higher state tax rates, I would like to convert as much as practical before then.
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Old 10-03-2014, 07:07 AM   #22
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I close on my HELOC on Monday. Teaser rate at 1.99% for 1 year, no annual fee. The only requirement was an initial draw which can be paid back immediately. I may just invest the required initial draw and pay the HELOC back within a year.

Edited to add that this came from a local, small, brick and mortar bank.
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Old 10-03-2014, 09:17 AM   #23
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I haven't found it to be very easy to compare these HELOC products--often the info isn't readily available on the bank/CU web sites. I'm particularly interested in how long the thing will remain in place after I set it up (i.e. how long before they'd re-appraise the house, look at my income again, etc). I'd like this to last at least 20 years, 25 if possible, most ER types are probably in the same boat. This has usually required a call to the bank.
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Old 10-03-2014, 09:41 AM   #24
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We got one from Citi years ago; it's interest-only and although the rate can vary, it's stayed at 2.75%. Sounds like we could do better, but the dollars may not be that much.

DH and I put everything on credit cards and then pay in full every month. We have a reserve for routine home repair but when we had to replace the furnace we used the HELOC to pay the credit card bill and paid back the HELOC over time. We also used it to buy cars twice: the first paid back within 3 years, the second one still open (bought the car in February). Why take money out of investments to buy a car when you can get a loan at 2.75% instead?

Similarly, we'll have a lot of repairs to do to get the house in move-in condition before we sell next Spring. Most are in the $500-$1K range but they'll add up. That will go on the HELOC, too. Even if we max out the $50K credit line (unlikely), we won't be in trouble since we have at least $180K in equity in the house.

In general, I'm wary of using the HELOC as an ATM, but in our case, borrowing is a strategic decision, not something we do because we don't have the cash.
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Old 10-03-2014, 10:06 AM   #25
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I have had HELOCS in place for about a decade. I have only used them twice: I drew 50k in early 2009 to go buy junk bonds, and I used it as a bridge loan when we relocated 2/3 of the way across the country in 2011. Rarely used, but boy is it a big deal when the opportunity arises.
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Old 10-03-2014, 10:26 AM   #26
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I just established a new HELOC two months ago. My FN planner person suggested it as a safety net. I"m not ER'd but am eligible in about a yr.

It turns out my old HELOC was about to expire (did not know they do that). I guess they do have a a term. Mine is small compared to yours at $150K.

But yes your DH is right. They do a very extensive analysis on your financial situation. But hey---it's "free" and found out my credit score is now 825 vs high 700's before. They also did a free appraisal of my home which was nice to have that updated. My rates are 3.74 variable and 4.49 fixed if I use it. Boeing Employees Credit Union (BECU).

Cheers.

Cheers.
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Old 10-03-2014, 11:49 AM   #27
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It looks like a HELOC would be a Catch-22 for us. We would like to use one to help buy our next home before selling our current one, but the HELOC has to be active for 24 months unless we want to pay all HELOC closing costs (several thousand dollars). Naturally, selling the secured property would close the HELOC and trigger the <24 month penalty.

There just ain't no free lunch! Wah.

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Old 10-03-2014, 02:07 PM   #28
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It looks like a HELOC would be a Catch-22 for us. We would like to use one to help buy our next home before selling our current one, but the HELOC has to be active for 24 months unless we want to pay all HELOC closing costs (several thousand dollars). Naturally, selling the secured property would close the HELOC and trigger the <24 month penalty.

There just ain't no free lunch! Wah.

Amethyst
Have you checked with other fin'l institutions? At max., both with WFB and my credit union, if I closed the HELOC within 3 years, the only cost is $500. I asked this question several different ways and was assured that was it; no other costs except $75 annual fee starting in year 2 which is waived with the opening of an account of $25K. In fact, WFB was the one that mentioned the sale of and repurchase of a new home scenario where the $500 would be returned if I opened a HELOC on the new property. All HELOC related costs including the home appraisal are picked up by the bank.
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Old 10-03-2014, 07:09 PM   #29
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When I established my heloc I learned one good reason to do so
I live in a hurricane zone
Should the dwelling be destroyed or damaged I can acess the heloc funds after the event but prior to an insurance settlement
This could be a lifesaver and prevent a drawdown of your portfolio
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Old 10-03-2014, 08:12 PM   #30
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I really like the flexibility they give you. I've used mine to buy real estate in Vegas, pay for a remodel and similar things. I decided to reduce stocks this last week. Rather than have the money in brokerage earning nothing, I decide to pay off my HELCO. It made easier to swallow paying the taxes know the money will "earning" 3.99%.

If a buying opportunity comes up I won't hesitate to tap into the HELCO.
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Old 10-03-2014, 08:45 PM   #31
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"If you've ever handled a penny, the government has your DNA."

There is no such thing as privacy anymore (see my signature). Tell them what they want to know and take out the full 500k line. It is a free option.
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Old 10-03-2014, 09:43 PM   #32
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I belong to Penfed and one other CU. The other CU only allows HELOC up to $200K so I didn't talk to them. Penfed has a maximum $400K HELOC, requiring the customer to pay for a home appraisal, and the <24 month closing cost penalty. I didn't think to ask "can I carry the HELOC over to the new property," and the rep didn't suggest it - only confirmed that selling the secured property would trigger the penalty.

Now, I've never banked w/WFB but here is what their web site calculator says about a $500K HELOC in my state/county (sorry about the formatting):

Loan Type Interest Rate APR 1 Payment Line of Credit Variable Rate 4.250% 4.250% $2,460.29
Line of Credit with 1-yr. Fixed-Rate Advance (FRA) Payments partially repay advance. At the end of the FRA term, unpaid balance rolls into your line at the variable rate in effect at that time. 2.865% 2.865% $2,072.16
Line of Credit with 5-yr. Fixed-Rate Advance (FRA) Payments fully repay advance 6.115% 6.115% $9,692.61
This doesn't match what some of you are reporting about WFB.

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Quote:
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Have you checked with other fin'l institutions? At max., both with WFB and my credit union, if I closed the HELOC within 3 years, the only cost is $500. I asked this question several different ways and was assured that was it; no other costs except $75 annual fee starting in year 2 which is waived with the opening of an account of $25K. In fact, WFB was the one that mentioned the sale of and repurchase of a new home scenario where the $500 would be returned if I opened a HELOC on the new property. All HELOC related costs including the home appraisal are picked up by the bank.
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Old 10-04-2014, 08:35 AM   #33
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Their regular rate is Wall Street Prime + ?. She said it would be about 4% at today's rate. If we open a savings acct with a minimum balance of $25K and have repayments automatically drawn from that, there is a .5% rate reduction as well as waiving the yearly $75 HELOC fee. I called our credit union and they also use Wall Street Prime which is currently 3.25%. They add .25%, so their current rate is 3.5%. They also have a $500 prepayment clause if the HELOC is closed within 3 years.
I've never looked into a HELOC - is that rate fixed? Or will it fluctuate as the Prime rate fluctuates?

What interest rate are you earning on your fixed income allocation? If your FI investments are earning 3.5%+, they're likely either longer term and/or junk status. Either way, they've likely already taken a bit of a hit, but are subject to a larger hit in the next 10 years, just as that prime rate would be ratcheting up (if your rate varies). A double whammy that would make it more sensible to sell some FI investments in lieu of drawing on the HELOC.

So, unless you have access to an insanely successful fixed income investment strategy earning you higher yields with an excessively low duration, I would try my darndest to lock in a 15/30 year mortgage on the home you're looking to buy.
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Old 10-04-2014, 09:14 AM   #34
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Another great thread. Just reading it made me realize we should look into this. DH went to our local bank yesterday and applied for one. If we need a new roof or a new car at a time when it is bad to sell assets, we'll have it available. Thanks guys!


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Old 10-04-2014, 10:27 AM   #35
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It looks like a HELOC would be a Catch-22 for us. We would like to use one to help buy our next home before selling our current one, but the HELOC has to be active for 24 months unless we want to pay all HELOC closing costs (several thousand dollars). Naturally, selling the secured property would close the HELOC and trigger the <24 month penalty.

There just ain't no free lunch! Wah.

Amethyst
Take a look around. Many out there don't require an appraisal (as long as you aren't tying up a high percentage of equity in it..in my case it's a 60k line of credit on a house worth about 250k). Also, closing costs can be quite minimal. If I close out my account early (two years I believe), I'd have to pay about $200. Of course, I have no reason to ditch it since it costs nothing, so I don't have a reason to close it.

Sent from my mobile device so please excuse grammatical errors.
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Old 10-16-2014, 05:33 PM   #36
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Went to our regular bank and got a HELOC opened. We can borrow up to $100K. Discounted rate expires in 6 months, but if we take out $50K or more the promo rate is 2.99%. I'm thinking save it till we need it vs take out $50K at the promo rate to lock it in. We have about 2 years available cash/cash equivalents as is barring needing a new car or new roof or other house disaster, and we have one more year of college living expenses and one semester tuition for DS.

What do people think? Lock something up at the low rate or wait? Our payments would only be $211/mo minimum.
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Old 10-16-2014, 08:34 PM   #37
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Personally I like having the HELOC available, but I'm not a big fan of taking a loan out on it just to get a favorable rate. If you don't actually need to use the money, the rate for any money you don't take is zero. Much better.

I suppose exceptions might be if you know you have a big need to cash coming up and borrowing early gets an advantageous rate for money. Or maybe if you were worried about having enough cash on hand to last for an extended unemployment or down market, you might want to proactively borrow. But that's just my opinion I'm sure others have other ideas.
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Old 10-16-2014, 09:06 PM   #38
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If you take the promo rate advance, how long is that rate locked in for? 6 months? 10 years? Somewhere in between? if we are talking 6 months, I would leave it untapped.
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To HELOC or Not?
Old 10-16-2014, 09:36 PM   #39
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To HELOC or Not?

We had to pay a reconveyance fee when we closed our HELOC (when we moved). Was handy for quick cash but rarely used. Have not bothered with getting another one and probably never will.
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Old 10-16-2014, 09:38 PM   #40
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If you take the promo rate advance, how long is that rate locked in for? 6 months? 10 years? Somewhere in between? if we are talking 6 months, I would leave it untapped.

The promo rate locks in for 10 years but only on that amount borrowed. We'll likely leave it unused unless we need it. 0% interest is better than any interest.


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