Question on HELOC loan.

[Ricechex]

I have a house, and approximately 2 years ago, I took out a HELOC loan, just in case. Never used it, its balance is zero. It was for a credit line of up to $100K. Since the credit line was based on the appraisal then, is it still good up to that amount? (I don’t plan on using it, but I would like to know)

[HLS]

It certainly should be.

I did hear from one client recently that their HELOC line had been reduced, which terrified them because that was their cushion.
Apparently had to do with their credit score, not property value.

You should have a lien recorded as a 2nd for $100K.

If it is from a bank or credit union, I would deposit your withdrawl into an account with them. It would be hard for them to bounce it and charge you a fee.

One thing that you should know is that if you are planning a refi of your first anytime soon, taking a draw on your HELOC will require cash out pricing on your refi to pay off both loans. If you aren’t planning a refi then it doesn’t matter.
Your rate/fee could be slightly higher and could be avoided if you know.

There are many people today that have access to funds that will push their liens to over 100% of todays value.

[Ricechex]

My brain is not comprehending….the loan is at zero, but good up to $100K. So, I could use the card or check and get cash, make purchases in any amount. I could write a check to Home Depot for $50, and then the balance on it would be $50. Of course, then I would have to pay it off or pay interest. Wouldn’t then my lien be at $50? So, how can I show a lien at $100K?

[HLS]

When they gave you a HELOC for $100k, there is a 2nd lien recorded against your property for $100K until the line is closed.

Typically the monthly minimum payment is interest only, so if you used $50, your minimum payment would be around 33c, and your available line would now be $99,950.

You can pay the $50 back at any time.

Don’t confuse lien with statement balance.
Your current statement balance is zero.
Your recorded lien is $100K.

Back to the job at hand,, please find us some free money 😉

[Ricechex]

HLS–Heh heh heh. Looking for some free money now…all I can see is a BofA with a 3% transaction fee on cash advances, 0% APR for 12 months. Thus, on $10K the fee would be $300. Take the $10K and lock it up for 5.5%, so you are making a little money, about $250 I think. Can’t decide if it is worth the effort. Although, I take a small amount of pleasure in getting them back at their own game! Let them try and make me a fool! No sir!

OK, back to HELOC then…..so, would it be better for me to close the account? Then, I would have NO lien at all. (I don’t like owing, liens, I like to be free of any financial complications)

[Raybyrnes]

Ricechex

Just to give you a perspective on the Credit Card Industry. They need to keep an average credit score in their portfolio so they are happy to lose money on the 0% because your credit score allows them to issue lots more credit cards at 20% interest rates to marginal credit people while keeping an overall average rate that can be packaged and collateralized in scecondary markets. Additionally, if you use the credit card they are able to collect fees from the vendors you pay. In many ways it is win win for those who are responsible with their credit.

[Raybyrnes]

Ricechex

Just to give you a perspective on the Credit Card Industry. They need to keep an average credit score in their portfolio so they are happy to lose money on the 0% because your credit score allows them to issue lots more credit cards at 20% interest rates to marginal credit people while keeping an overall average rate that can be packaged and collateralized in scecondary markets. Additionally, if you use the credit card they are able to collect fees from the vendors you pay. In many ways it is win win for those who are responsible with their credit.

[Ricechex]

HLS–Heh heh heh. Looking for some free money now…all I can see is a BofA with a 3% transaction fee on cash advances, 0% APR for 12 months. Thus, on $10K the fee would be $300. Take the $10K and lock it up for 5.5%, so you are making a little money, about $250 I think. Can’t decide if it is worth the effort. Although, I take a small amount of pleasure in getting them back at their own game! Let them try and make me a fool! No sir!

OK, back to HELOC then…..so, would it be better for me to close the account? Then, I would have NO lien at all. (I don’t like owing, liens, I like to be free of any financial complications)

[HLS]

When they gave you a HELOC for $100k, there is a 2nd lien recorded against your property for $100K until the line is closed.

Typically the monthly minimum payment is interest only, so if you used $50, your minimum payment would be around 33c, and your available line would now be $99,950.

You can pay the $50 back at any time.

Don’t confuse lien with statement balance.
Your current statement balance is zero.
Your recorded lien is $100K.

Back to the job at hand,, please find us some free money 😉

[Ricechex]

My brain is not comprehending….the loan is at zero, but good up to $100K. So, I could use the card or check and get cash, make purchases in any amount. I could write a check to Home Depot for $50, and then the balance on it would be $50. Of course, then I would have to pay it off or pay interest. Wouldn’t then my lien be at $50? So, how can I show a lien at $100K?

[HLS]

It certainly should be.

I did hear from one client recently that their HELOC line had been reduced, which terrified them because that was their cushion.
Apparently had to do with their credit score, not property value.

You should have a lien recorded as a 2nd for $100K.

If it is from a bank or credit union, I would deposit your withdrawl into an account with them. It would be hard for them to bounce it and charge you a fee.

One thing that you should know is that if you are planning a refi of your first anytime soon, taking a draw on your HELOC will require cash out pricing on your refi to pay off both loans. If you aren’t planning a refi then it doesn’t matter.
Your rate/fee could be slightly higher and could be avoided if you know.

There are many people today that have access to funds that will push their liens to over 100% of todays value.

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