Investor · Wichita Falls, TX · Member since 2010 · 3k+ posts · 603 votes
Hi everyone,
Got my HELOC on my primary last month and just made the first payment. It turns out my loan terms during the draw period are that my minimum payment is 1% of the balance. For some reason I thought it would be interest only.
My minimum payment was $711
of which $513.08 went to principal
and $197.92 went to Interest. (3.99% APR Adjustable)
To circumvent this inconvenience I just drew out the $513.08 right after I made the minimum payment to make things essentially interest only...
Why on earth would they NOT have it interest only during my draw period? Is there some regulation they must adhere to? Just trying to wrap my head around it.
The negative to the above situation is that now on my credit report and my DTI calculations it shows $711/mo as debt instead of the $197 I thought it would be.
Kind of just venting a bit and I figure this may help someone out looking for info on HELOCs in the future.
Investor · Maui, HI · Member since 2009 · 13k+ posts · 3k+ votes
13y
Hey Mehran Kamari that sucks. I have a HELOC that is interest only. I'm guessing there was an option somewhere, and the banker selected the wrong one. Not cool. I'd complain and see if you can find out. Maybe you could refi it to a real HELOC.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
13y
This should have been spelled out clearly in your loan documents. If something different is actually happening than what's in the docs, call and find out why.
Investor · Wichita Falls, TX · Member since 2010 · 3k+ posts · 603 votes
13y
Jon Holdman It is clearly spelled out in the loan docs that the minimum payment will be 1%. In extremely small writing. I did see this however when I glanced over the docs the night before closing.
For some reason I thought it was referring to the fact they use 1% of the full line ($100k) for the DTI calculations at first.
I made the mistake of assuming all HELOCs have interest only monthly payments.
Brandon Turner I tried to handle it but kept being referred to the loan docs which spell it out. Refinancing into a real HELOC is definitely an option though. This one was high LTV (90%) and I'll have to find someone else willing to go that high (took me a while to find this one!)
On the brighter side, I'm putting the $ to work already and things are moving along quicker than expected deal-wise right now.