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.
2007-02-25 16:10:19 · 3 answers · asked by gradjimbo 4 in Business & Finance ➔ Credit
The minimum equity needed for a HELOC is 10% but it may be difficult to qualify for that and there will be fees on top of that. A typical HELOC requires you to have 25% equity/down-payment and ok credit (Your credit doesn't have to be perfect... If you applied for a credit card today, would you be approved? If yes, then your credit is good enough to qualify).
5% will only get you a typical mortgage.
2007-02-25 16:33:35 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Most banks are offering home equity lines of credit with discounted rates, not by having the customer pay points, but rather by having the customer pay filing fees and taxes in their state. Every time someone takes out an equity line of credit, the bank sends someone down to the local courthouse to pay taxes and recording fees. If you pay those fees the bank doesn't have to compensate by increasing your rate.
The interest rate for a home equity line of credit is based on the Prime rate, which is set by the wall street journal on the 24th of every month. Currently Prime is at 8.25%.
Whichever lender you choose to do business with, make it a point to ask what their minimum payment options are each month. I've seen some banks offering Prime minus 1%, which is a great rate, but when you read the fine print, the minimum monthly payment is 1.5% of the outstading balance. With these equity lines, you want the option to pay interest only. That way you dictate what your payment is each month and not the bank.
For example: Let's suppose you take out a $100,000 line of credit:
If you are at prime your interest only option payment is $688. Anything you contribute in addition to this finance charge goes to paying down your principle.
If you are at prime and your payment is 1.5% of the outstanding balance, your monthly payment is $1500.
Both payments require you to pay the same amount of interest.
Just something to keep mind. Something I've been seeing a lot of lately.
2007-03-01 14:39:09 · answer #2 · answered by Corporate Banker 2 · 0⤊ 0⤋
There are banks and credit unions who provide HELOCs with no points or fees (up front or built-in to the loan), yet offering very competitive rates. If you have a good vredit score, check with a local credit union. Anyone can now join a credit union.
2007-02-25 18:27:12 · answer #3 · answered by jimmyjohn 4 · 0⤊ 0⤋