No Cost HELOC??

[kyzymurgist]

Make sure to check out your local Credit Unions. My first mortgage bank actually referred me to one of our credit unions (UKFCU) when I was shopping a line of credit. I was told no bank, local or national could compete with them for HELOCs.

Since they are affiliated with our University, I assumed that I couldn't be a member but a rep informed me that almost everyone can join by jumping through a few minor hoops.

Good luck.

 

[OldShooter]

I guess the fee if the HELOC is paid off before x years is what makes it profitable for the lending institution? I was thinking that it wouldn't seem like a very desirable loan if the lender knows that you will pay it off very quickly, as we would intend to do. ...

@JDARNELL's post #11 mentioned a fee for closing a HELOC, not for paying it to zero. The idea of a line of credit is that you go in and out as you need cash; there is really no concept of "paying it off" except during periods when you don't need any money from it. The lender hopes you will use it a lot and for a long time. As I mentioned we had a HELOC that went unused for a decade or more, but once in a while I'd get a direct mail piece telling me what wonderful vacations we could take just by drawing on the line.

 

[SumDay]

Before we retired, we opened a HELOC at our bank. We have a mortgage that is ~10% of the value of the home. It's with Freedom Mortgage, and they are AWFUL, so I asked our bank if we could refinance through them, or maybe use the HELOC to pay it off. They ended up offering a no cost Home Equity Mortgage, which is separate from the HELOC. The rate is 3.125%. The application process was interesting since we're retired. They don't give a rat's a$$ about our investments and real estate, and were far more concerned about seeing proof of pension and SS payments. Frankly I'm shocked they gave it to us, but the payments will be far less than most car payments, so I guess they think we can manage them with our monthly 'income'. I've banked with them for 50 years, so that may account for something. Who knows.

 

[Another Reader]

I have/had a no-cost HELOC through Wells Fargo. They also originated the current mortgage and service it. Some time ago they closed down their entire home equity lending program. The line still exists but cannot be used. I believe Chase has also shut down home equity lending, but existing lines can be used. B of A appears to still be in that line of business, as is the much smaller footprint US Bank. Probably a good dea to shop around if you want one of these.

 

[GravitySucks]

Using a HELOC on my home to help DD2 buy a house now.
Credit Union used to hold the mortgage and I have a line of credit equal to 2/3 my homes value. Zero closing cost. Floating rate of Prime minus 1/2. No appraisal. Only documentation needed was a copy of the deed and 2020 taxes. Took less than an hour complete.
Now I have to decide to roll it into a mortgage which would be 1/2% lower fixed rate but will cost over 5% of the loan value.

 

[l8_apex]

A margin credit line will work too but is usually much moe expensive (higher rate) unless it is well into the 7 figures.

IB margin rates: https://www.interactivebrokers.com/en/index.php?f=46376 1.58% for anything from $1 to $100k. Rates for higher amounts go down from there.

 

[friar1610]

Did the same thing about 8 years ago in a non-hot real estate market. Got a no-cost, interest-only HELOC from USAA Fed Savings Bank on House A. After the HELOC had closed, listed House A for sale. Scraped together as much cash as I could from various personal sources and used the HELOC for the difference to buy House B for cash. Moved into House B. House A didn’t sell for 6 months so I made monthly interest payments on the HELOC. When House A closed, the HELOC was paid off and they all lived happily ever after.

 

[Golden sunsets]

I spoke with a few local lenders today. One local bank is offering 1.99% after drawdown until 12/31/2022, then Prime +0 thereafter. No closing costs. Drive by appraisal at no cost. 85% Loan to Value. 15 year draw down period. Interest only for 15 Years. If closed within 3 years $300 close out fee, but one need not have a balance outstanding, just keep the line open. Sounds pretty good. Am I missing anything?

8-10 weeks to close though. Seems a bit long.

 

[euro]

I spoke with a few local lenders today. One local bank is offering 1.99% after drawdown until 12/31/2022, then Prime +0 thereafter. No closing costs. Drive by appraisal at no cost. 85% Loan to Value. 15 year draw down period. Interest only for 15 Years. If closed within 3 years $300 close out fee, but one need not have a balance outstanding, just keep the line open. Sounds pretty good. Am I missing anything?

8-10 weeks to close though. Seems a bit long.

If it works for your timeline, then go for it!

 

[JDARNELL]

I spoke with a few local lenders today. One local bank is offering 1.99% after drawdown until 12/31/2022, then Prime +0 thereafter. No closing costs. Drive by appraisal at no cost. 85% Loan to Value. 15 year draw down period. Interest only for 15 Years. If closed within 3 years $300 close out fee, but one need not have a balance outstanding, just keep the line open. Sounds pretty good. Am I missing anything?

8-10 weeks to close though. Seems a bit long.

Right. That seems pretty good. So you know what it would cost you if you sold the place and the line was closed. Everyone is backed up right now. I need to add one to my place.

 

[Golden sunsets]

Right. That seems pretty good. So you know what it would cost you if you sold the place and the line was closed. Everyone is backed up right now. I need to add one to my place.

$300 if closed within 3 years. Seeing that we'd be selling the underlying asset, I presume we would have to close the account and pay this fee, which is not onerous.

 

[Golden sunsets]

IB margin rates: https://www.interactivebrokers.com/en/index.php?f=46376 1.58% for anything from $1 to $100k. Rates for higher amounts go down from there.

Those rates are great. Tomorrow I'll contact our brokerage to see what their terms would be and compare to the HELOC quote I reported on above.

I also have a realtor coming Monday to prepare a market analysis for us on our property. So we'll likely be prepared when the right property comes on the market. The broker has intel that a listing will likely be coming on in our desired neighborhood soon. And we have other intel that a different property in the same neighborhood will come on due to death of the owner. Got to get crackin'.


Oh and BTW, BOA, our primary bank will not grant HELOCs that will be used as a bridge vehicle, so not all HELOC lenders will allow the purchase of another home, as the purpose. I wouldn't want to lie, so we've ruled that bank out.

 

[Peter]

Oh and BTW, BOA, our primary bank will not grant HELOCs that will be used as a bridge vehicle, so not all HELOC lenders will allow the purchase of another home, as the purpose. I wouldn't want to lie, so we've ruled that bank out.

We had the same experience with BofA. Went with a local credit union instead. Much better service.

 

[ERD50]

Interesting ERD50. Did you arrange for the LOC before you made the offer? How long was the LOC good for? I'm thinking of establishing the borrowing capacity now, knowing that the right house might not come on the market until next spring or later. Would that scenario have worked for you?

ERD50; What percentage of your taxable will the brokerage allow you to borrow?

Yes, arranged it when we started seriously looking. If the market is still as hot as it was, you need probably need to jump in that same day it goes on the market.

I'm not aware of any time limit, but it is a variable rate, so I plan on locking in a 30 year mortgage.

Looks like they'd allow 70%, but this is also based on what is in your portfolio. This is a taxable account, so it's all broad index stock funds/ETFs and BRK (to keep dividends down as I do Roth conversions). My fixed allocation is in my tIRA. I assume it would be a lower % if you had individual stocks, or higher if there was more fixed income there.

edit/add: You def want to set up early. We had a glitch because apparently the account (a trust) wasn't set up ( 15 years ago?) in the exact way that the LOC department needed to see. The trust is DW's name, but I am co-trustee, and I think they just had me as successor trustee (which I am). This went back and forth for a few weeks and they kept asking for all sorts of info, until someone realized they just needed to re-set the account to reflect that we were co-trustees. I can't recall the term they used, something like re-title, maybe "re-paper"? It didn't affect anything else, but once they did that, the rest of the process to get the LOC was smooth, done in a couple days I think.

Also had a glitch when I went to wire the funds. I had made it clear I need to wire the funds for a closing, all OK. I called on Monday to make sure we were good for a Wed close, all good. Then, Tuesday, I get the $ numbers and all the Wire #s for Wed, and I'm getting some run around on the wire from Etrade. Oh no! Turns out they needed to get a security check (good) with me, but that involved texting a security code to my phone. Well, every security check in the past involved sending it to my email, but they said that wasn't good enough, and my phone wasn't set up previously, so I couldn't set it up that day and use it (makes sense). I had to use my firm voice to let them know this absolutely had to be there in the morning, they managed to get that done. But it was nerve wracking. So don't trust that they are set, make sure of it.

-ERD50

 

[Another Reader]

So, based on OldShooter's positive comments, I contacted US Bank about a HELOC. I had talked to them two years ago about a HELOC, and I contacted the person I talked to then. She turned me over to the wealth management person in the local branch, who gave me the pitch on the benefits of their "wealth management" program. I politely demurred, so she agreed to set an appointment to open a checking account and look at the HELOC options.

An hour later I got an email confirming my appointment to discuss wealth management and a long list of benefits for signing up. Oh, and please bring copies of your latest statements so we can review your portfolio and tell you about our current promotions for new clients.

This morning I sent the e-mail cancelling the appointment...the HELOC pricing looks reasonable, but not interested in having to fight off the sales pitch. I looked up their highest tier of wealth management, which is run out of separate offices in a few cities. Just for fun, I looked at the credentials of the account managers. Not one had a degree in business, economics or finance.

Although the branch is nearby, I'm thinking that signing up for a checking account will only allow them to mine my credit report for more information to use to sell me on their other products. Whe knows where else that information will go?

Back to the search for a good HELOC product...

 

[OldShooter]

So, based on OldShooter's positive comments, I contacted US Bank about a HELOC. I had talked to them two years ago about a HELOC, and I contacted the person I talked to then. She turned me over to the wealth management person in the local branch, who gave me the pitch on the benefits of their "wealth management" program. I politely demurred, so she agreed to set an appointment to open a checking account and look at the HELOC options.

An hour later I got an email confirming my appointment to discuss wealth management and a long list of benefits for signing up. Oh, and please bring copies of your latest statements so we can review your portfolio and tell you about our current promotions for new clients.

This morning I sent the e-mail cancelling the appointment...the HELOC pricing looks reasonable, but not interested in having to fight off the sales pitch. I looked up their highest tier of wealth management, which is run out of separate offices in a few cities. Just for fun, I looked at the credentials of the account managers. Not one had a degree in business, economics or finance.

Although the branch is nearby, I'm thinking that signing up for a checking account will only allow them to mine my credit report for more information to use to sell me on their other products. Whe knows where else that information will go?

Back to the search for a good HELOC product...

Sorry if I led you astray. My experience was that when they saw our balance sheet we were moved to the "wealth management" group even though we have no assets with USBank. A small positive result was that my Visa got upgraded somehow and I am now getting more points. The sales pitch was a one minute blip. A woman called me and asked if she could help, then started commenting on the day's financial news. It quickly became evident that she didn't know what she was talking about, which I politely pointed out with a couple of questions. I then thanked her for her time and that was the end of the pitches.

 

[Another Reader]

Sorry if I led you astray. My experience was that when they saw our balance sheet we were moved to the "wealth management" group even though we have no assets with USBank. A small positive result was that my Visa got upgraded somehow and I am now getting more points. The sales pitch was a one minute blip. A woman called me and asked if she could help, then started commenting on the day's financial news. It quickly became evident that she didn't know what she was talking about, which I politely pointed out with a couple of questions. I then thanked her for her time and that was the end of the pitches.

I'm sure every office is different. These folks are clearly sales motivated. Their branch is located adjacent to a large gated retirement community and that probably affects their marketing approach.

I think the average Fidelity person is more sophisticated than these folks, who probably attended more marketing classes than technical ones. And I really wonder if they (and everyone else) aren't mining the credit reports required to open an account to market to new customers.

On to the next candidate!

 

[Golden sunsets]

IB margin rates: https://www.interactivebrokers.com/en/index.php?f=46376 1.58% for anything from $1 to $100k. Rates for higher amounts go down from there.

I spoke with Merrill Lynch today and their margin loan interest rates are 5.8%-6.25% depending on the balance so that idea has been nixed. BOA has never been known for their great rates.

 

[GTFan]

Schwab has a Pledged Asset Loan with rates around 2.5%, IIRC. Can loan up to 70% of your taxable assets, no way would I go that high since it's basically another margin loan.

From what I've read getting Interactive Brokers margin loan into your cash account takes at least 30 days from account setup and brokerage transfers, they have the cheapest rates by far but will automatically sell assets in a margin call. Not a real issue if your loan is short-term and/or you keep it at 25% or less of assets. No fees, open an IB Pro account for lowest rate.

 

[2177V]

Comparison shopping is the way to go. Some HELOC charge a yearly maintenance fee while other don’t. I like Bank of America because there is no fee to apply and no maintenance fee. The interest rate may be 1/4 % higher but if you sign up for an automatic payment of the monthly minimum, they waive 1/4%. There is also no fee for paying down the HELOC which suit my need when I borrow money against my rental properties to buy equities after a 10% or 15% stock market correction. I then pay back the HELOC balance after the recovery and pocketing the 10% or 15% gain. I do not play this game on my principle house but I do use a HELOC on my principle house to buy more properties because buying properties is less risky than the stock market.

 

[meleana]

You rent in between. Hopefully a home with basement storage. And a lease with a 6 month out.

 

[GTFan]

That's an option, but moving twice sucks and your 6-month rent costs more than 12.

 

[meleana]

That's an option, but moving twice sucks and your 6-month rent costs more than 12.

Huh? You pay just the 6 months rent.

But yeah- moving twice sucks, but you do what you have to do.

 

[GoodbyeYellow]

Not much to add to the excellent responses and ideas here, except to say we did this twice in succession (two homes, one after the other). Worked exactly as advertised and our only costs were interest and in the second case, closing the line as well because it was within 3 years and we were selling the home.
It was BoA each time. Their process is klugey and slow but their rates are competitive at least.

 

[GTFan]

Huh? You pay just the 6 months rent.

But yeah- moving twice sucks, but you do what you have to do.

6-month leases are usually more expensive than 12. Of course you could always skip out and forfeit the deposit on a 12-month.