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Updated over 5 years ago on . Most recent reply

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Aaron Sauer
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4
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Avoiding HELOC early closure fees

Aaron Sauer
Posted

Let's say someone has an interest only line of credit secured by investment property, and that line has a $100k limit at 5% (using round numbers for easy math).  Bank pays closing costs for the LoC, but borrower is required to pay them back if he closes the line of credit before 2 years.  LoC has a 10-year draw period, and is then converted to a 10-year loan.

Now, let's say the borrower decides to take $10k out.  If the first payment made on the line, during the interest-only period, is $5500 ($500 to interest - $5000 to principle) will the remaining monthly interest payments be recalculated according to the new loan balance of $5000, or would monthly interest still be the same $500 as original?

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