Question : What is the typical point for a home equity line of credit?
Does anyone know the typical point for a home equity line of credit ? By point, I mean the up-front fee that is proportional to the credit limit. So if the term asks for 5 points (5%) and the line of credit is $100,000, there is a $5,000 fee. Do you think that the numbers I've just mentioned are a pretty good deal, assuming that the interest rate is good? Thank you.
- asked by gradjimbo
All Answers:
Answer #1
The minimum equity needed for a HELOC is 10% butit may be difficult to qualify for that and therewill be fees on top of that. A typical HELOCrequires you to have 25% equity/down-payment andok credit (Your credit doesn't have to beperfect... If you applied for a credit card today,would you be approved? If yes, then your credit isgood enough to qualify).5% will only get you atypical mortgage.
- answered by Frank M
Answer #2
There are banks and credit unions who provideHELOCs with no points or fees (up front orbuilt-in to the loan), yet offering verycompetitive rates. If you have a good vreditscore, check with a local credit union. Anyonecan now join a credit union.
- answered by jimmyjohn
Answer #3
Most banks are offering home equity lines ofcredit with discounted rates, not by having thecustomer pay points, but rather by having thecustomer pay filing fees and taxes in their state.Every time someone takes out an equity line ofcredit, the bank sends someone down to the localcourthouse to pay taxes and recording fees. If youpay those fees the bank doesn't have to compensateby increasing your rate. The interest rate for ahome equity line of credit is based on the Primerate, which is set by the wall street journal onthe 24th of every month. Currently Prime is at8.25%.Whichever lender you choose to do businesswith, make it a point to ask what their minimumpayment options are each month. I've seen somebanks offering Prime minus 1%, which is a greatrate, but when you read the fine print, theminimum monthly payment is 1.5% of the outstadingbalance. With these equity lines, you want theoption to pay interest only. That way you dictatewhat your payment is each month and not thebank.For example: Let's suppose you take out a$100,000 line of credit:If you are at prime yourinterest only option payment is $688. Anything youcontribute in addition to this finance charge goesto paying down your principle.If you are at primeand your payment is 1.5% of the outstandingbalance, your monthly payment is $1500. Bothpayments require you to pay the same amount ofinterest. Just something to keep mind. SomethingI've been seeing a lot of lately.
- answered by Frank - Wachovia Banker
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