HELOC's

Once a very popular product, they have pretty much become non-existing. Once people could go to 100% with 80/20’s and or use their seconds to payoff debt, make home improvements, etc. Now a days, it is very rare to find a bank that will offer a second. The remaining ones that do offer seconds will only go to 80-85 CLTV (Combined-loan-to-value). The will all require full documentation and most likely order an appraisal. They also qualify the borrower on the full drawn amount of the HELOC. What that means is if you request a HELOC for 100k, they use the current rate based on 100k, (even if you only plan on initially taking out less than 100k) to qualify for the payment, to see if you qualify for the loan. Most HELOC’s have an early termination fee. That means if you closed the line within the first 3 years, the banks will add whatever amount of money they incurred to open the line, to the payoff, for them to recoup their costs. You can have a balance of zero and leave it open until the 3 years expires and you will not be charged the early termination fee. One option banks are offering these days is that you can request to lock in your HELOC to a fixed rate. The one thing you must know is that when you request to fixed the rate, it will not be at the HELOC rate, it will be a the current rate the banks are offering for HE-Loans. Most banks usually offer HELOCs around the prime rate. It usually is Prime plus a margin, anywhere from 0-2.0. Some banks offer a .25 discount if you do an ACH. ACH is when you let the bank electronically withdraw money from your checking account to make the monthly payment for the HELOC. 

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