HELOC Current Interest Rates

[upwardspiral]

I am considering setting up a line of credit. I was quoted a margin rate of 0.59 over prime which is currently at 3.25%. Total interest rate of 3.84% at current prime.

This is through BofA.

This sounds pretty inexpensive to me. Anyone else checking rates right now?

Thank you in advance for any feedback.

[HLS]

If you want to shop, then SHOP.
HELOCS come with different rules from each institution. Their money, their rules.
Call every bank/credit union and ask what their pricing is.
It may depend on credit score, amount of line and equity position.

Be clear on closing costs. Some will offer no closing costs, but an annual fee. Some have an early termination fee if you close the line of credit in the first 3 to 5 years.
Is there a ‘floor rate’?

Understand that they will record a 2nd lien against your property for the maximum amount of the line, whether you use it or not.

Be clear on the repayment terms. It may be interest only for the 1st 10 years and then a mandatory principal & interest payment on a 10 year amortization after that.

A $200K HELOC line is a $200K 2nd lien against your property.
Know that having a HELOC recorded against your property WILL complicate any future refi that you attempt, even if you have not drawn $1 on the line.
(Not impossible, but complicate)

Depending on your needs, current rate, equity situation AND ability to qualify,
a cash out refi may be another/better option for you.
HELOC rates are ALWAYS adjustable and will probably only go up from here.

The rate that you quoted above is not much lower than a 30yr fixed rate. Is it worth the risk TO YOU ?

Best HELOC I ever saw was a few years back at prime minus 1.50 with no floor.
That HELOC is currently @ 1.75% but they no longer offer it.
In general, rates at BofA are often terrible.

[upwardspiral]

HLS – Thank you for taking the time to respond in such detail!

Yes, BofA has a $395 penalty if closed in less than 3 years.

I just refied my jumbo loan at 3.875 and I don’t think that I’ll do any better than that, so the burden with the second if I want to refi is probably not an issue. It is worth thinking about though.

I will shop and reply with my findings.

Thanks again!

[HLS]

You are welcome.
You may be able to get a HELOC at prime without an added margin from a different institution. (Currently 3.25%) perhaps less than prime.

HELOCS are EXTREMELY profitable for them as their current cost of money is 1% or less.
I don’t know if anyone is doing prime minus anymore.

No closing costs and an early termination fee are standard, but can vary, as well as the total % that they will loan to. 75%-80% inclusive of your 1st is probably max these days.

It truly is ‘their money, their rules’ vs. a 30yr Fannie Mae mortgage where almost everybody has the same rules/guidelines for an approval.

If it’s worth it to you, I would call every institution that I could find.

A small local/community bank might be having a special or promotion (such as a lower rate if you have auto withdrawal OR open an account with them)

Because HELOCS are at an adjustable rate, there is ZERO interest rate market risk to the lender (although they still face the risk of depreciation of the property)

Report back with your findings! I will be surprised if BofA has the lowest margin. ,,,HLS

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