Posted by DellaCa on 7/5/06 2:09am
Msg #130806

heloc and intrest rate

Is the intrest rate on a heloc usually higher than a refi? And if so why I would like to hear your ideas.

Reply by Jenny_CA on 7/5/06 3:14am
Msg #130808

The interest rate is usually higher on the HELOC. The ones I have been doing have been for people trying to get out of a bind pronto.

I'll learn the why's along with you.

Reply by ReneeK_MI on 7/5/06 3:37am
Msg #130809

The less equity there is, the higher the loan risk. Higher risk equals higher interest rate. That's the reason there's PMI on first liens secured by over 80% of a home's value. A HELOC is secured by the equity, plus it's a second lien - both of which would increase the loan risk. HELOCS have a higher base interest rate because of those reasons - then it would increase further if there are additional credit risks.

There are a lot of reasons to chose a HELOC instead of a first lien refi - so don't assume a borrower is necessarily "in a bind".

Reply by ReneeK_MI on 7/5/06 4:23am
Msg #130811

correction - HELOC is 2nd lien IF there's an

existing first. It's certainly possible to have a HELOC w/out having a first, although in the event that an owner decided to ADD a first lien, it's also typical that HELOC lender would agree to subordinate their position. So, the base rates on HELOC's arbitrarily factor that potential (again, typically).

Reply by ReneeK_MI on 7/5/06 5:25am
Msg #130812

cripe - additionally, rates are higher because ...

they can be. TILA - there for your reading pleasure, I now officially have a headache and love these reminders of why I am no longer chained to a cubicle. Now, all I have to worry about is making sure I'm dead-on with my answers before Paul has a chance to pour his morning coffee =)

Reply by Jenny_CA on 7/5/06 12:44pm
Msg #130889

Thank you for the info but don't you assume

that I assume that the borrowers are in a bind. I said that the ones I have been doing were with borrowers that were in a bind. That is one of the reasons I didn't even want to speculate on the why a higher ineterest rate, I know there are may other reasons for HELOCS: Swimming pools, redecorating a home, etc.

Again, thank you for the info.

Reply by ReneeK_MI on 7/5/06 1:06pm
Msg #130897

Jenny -

My apologies if you were offended - my reply certainly appeared to be directly to you, since it fell under your post, but my intention was by no means personal and the posting placement was purely coincidental. I try to always bear in mind that Newbies read all of our info, and that THEY might make assumptions according to what they read - hence the clarification.

Truly, I meant nothing offensive to you. =)

Reply by Jenny_CA on 7/5/06 3:17pm
Msg #130909

Thank you Renee

You are right, your answer to Della helped me also. :-)

Have a good day.

Reply by sue_pa on 7/5/06 7:37am
Msg #130817

when interest rates were at their very low points a few years ago, people who were positioned correctly got HELOCs at rates lower than prime. They then used their conversion feature for perhaps a $50 fee or even had the fee waived. Now, their HELOCs have fixed portions in the 4%s or 5%s. So, as everything in this business, there is no general statement or rule that can be made.

Reply by Janlee_MI on 7/5/06 11:36am
Msg #130867

Real Advantage to a Heloc is that it stays open until it is

closed by the borrower. Even if there is no balance so closing cost only have to be paid once.

Reply by DellaCa on 7/5/06 12:30pm
Msg #130882

Re: Thank you everyone n/m