Advice on Home Equity Line of Credit

Canadian Girl

Dryer sheet aficionado
Apr 20, 2006
We have a home near Palm Springs and am currently applying for a Home Equity Line of Credit as we don't want to sell but want some equity. Anyone have any advice whether to go for the Adjustable Rate or Fixed Rate? Given that we are Canadians, the Adjustable rate is for interest only and is approx. 9% (for 20 years) compared with a Fixed Rate at approx. 12%.
How much are you planning to draw on the line? How long will you have the amount outstanding? How much strain will the interest payments be on your budget?

Given the 300BP differential, I would probably go with the floater. But you would want to make sure you wouldn't be in trouble if rates shot up beyond the 12% fixed rate.
These lines are a great strategy for anyone that owns residential real estate ... great on rentals or principal residences, and best put in place when you really don't need the money. 

We've usually gone with floaters because these are backup sources of cash for us, not a normal fixed expense, and we have a few to work with ... variable programs ususally group around prime, plus / minus 1% or so.

If you're going to pull signfiicant cash out and keep it out as long as possible, then the interest rate choice will depend greatly on your view of future events.  If you think rates will continue to climb significantly, a fixed rate may still appeal to you.

Also note these are usually very cheap to put into place.  If you later decide you don't like the deal, not too tough to switch to another lender / program.

The rates you quote seem high ... try and for a couple more sources.  Watch for program details like a .25% rate cut for direct debits to your bank account for monthly payments; promotions that provide a lower rate, but a requirement to pull down a certain amount of cash (usually NOT accompanied by a requirement to keep all of that cash outstanding for a certain period); lower loan-to-values (LTV's) will also drop the rate, as opposed to high LTV's like 90%+.

These are great tools, and very handy for financial flexibility ... you can stroke a check sometimes (on the house!), when otherwise you might need to cash in a CD, etc.

Best of luck.
Try these guys:

You can apply by filling out a single form to join some goofball outfit that makes you eligible to join (for a one time fee of something like $20), and is also an application to join the credit union.

As mentioned, 7.75% with decent credit, no closing costs (no costs period) and they frequently have cash back deals ($300 or $500 when you open a HELOC and have direct deposit!), or take some of the interest off if you have direct deposit and automatic payment of the loan, etc.

I've been with them for over 20 years now, although I'm moving my banking to vanguard as DCU seems to be hung up on making their web site so secure that I dont want to use it anymore.

Still keeping my free HELOC with them though.
Just moved my HELOC to Charles Schwab Bank 7% for 70%LTV No Fees, painless process, they did all the paper work and closed my existing HELOC at my Credit Union (7.75%).

I was actually rather shocked that the Credit Union wouldn;t budge on their rate. We're long time customers(20 years) and have our first mortgage with them also, 800+ credit rating. I went to them and said here's is a published rate, match it and you can keep my business. They said so sorry. Their loss. Mine and Charles gain.
Check out ETrade as well, their rates aren't as good as some of the credit unions but they are better than 9%.
My wife did her heloc on her old house with ING direct. Did the app online, lady came out to bring the paperwork, they didnt even do an appraisal or have anyone check out the house, no closing costs, and they offered something like a hundred or two hundred bucks when you used it. We took a hundred bucks out, put it right back in, got the bonus, and no interest was charged. For an appraisal, they initially said someone in the area "might do a quick drive-by", but later said "we dont have anyone in the area".

Gave her 40k at the same rate I was getting from the credit union, which was pretty good.

For all they knew, the house had fallen in a hole or burned to the ground. The last time there was a sales transaction on it was 12 years ago.

In fact, I had already gotten a regular savings account with them. I got a bonus by "referring" her and another bonus when she "used" the heloc. I think we made about $300 by opening my account with a microsoft money $50 bonus, the referral bonus and the 'heloc' bonus.

That was a couple of years ago, might not be so great now.
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