Please Help Me Evaluate HELOC options!

[Ryan Anderson]

Hi BiggerPockets friends!

I am currently shopping for HELOC lenders for my primary residence in the hopes of leveraging the HELOC for real estate investments. I've spoken with several lenders so far, and am trying to figure out how to best evaluate the pros and cons of the different options. I've had different lenders that have provided wildly different valuations on my property, and have no idea why that would be the case. This makes it difficult to know where I will get the best terms.

For example:

Bank of America said that based on a quick desk review, they assessed my property's value to be $603,000. However, BofA had very high interest rates compared to other lenders even with my credit score (I have a credit score of 830), and BofA seems to only offer their better rates if you take an initial draw of a certain amount early on. I want to have the HELOC available and ensure the funds are there when the right deal comes up, but I don't like feeling like I have to take an initial draw in order to get better rates .

BECU offered better rates than BofA, and charges NO fees of any kind to open a HELOC (there are no closing costs, no annual fees, no origination costs, etc.) They also have no minimum draw requirements. BECU said I qualified for their best rate right now at 4.49% APR. They also offer an option to lock in up to three "fixed rate" draws at any given time with no additional fees to lock in the fixed rates. The fixed rate draws are at a higher interest rate, but with BECU the fixed rate option would be around 0.5%-1.0% higher than the variable rate, which seems significantly less than the fixed rate options through other lenders. It's also nice that BECU doesn't limit you to locking in three total fixed rate draw throughout the life of the draw period (like PenFed), but allows you an unlimited number of times that you can lock in a fixed rate, as long as you don't exceed three fixed rate draw at one time. Once you pay one of the fixed rate draws off, you can lock in another fixed rate draw if you wish to. This seems like a nice feature during a time when interest rates are rising, especially if the fixed rates they offer are not significantly higher than their variable rates. The other nice thing about BECU is that they told me they DO offer HELOCs on rental properties, even rental properties outside of the state that I live in. I like the idea of using one HELOC lender for all of my properties in the future, so this is appealing to me.
HOWEVER, after I began the application process with BECU and they ran my credit, they said that their desk review of my property came back lower than expected, at just $540,000. This is a significant difference from the valuation that BofA gave me. BECU said they couldn't justify ordering a full appraisal unless I paid for it. So, I'm trying to figure out if I should still go with BECU or see if I can get some better valuations elsewhere.

KeyBank's variable rates were better than BECU. KeyBank offers a 0.25% discount if you have a checking/savings account opened up with them, and with my credit that discount with KeyBank would put me right at the PRIME interest rate of 4.0% right now. They said I would essentially never go above the PRIME rate during my draw period with them based on my credit score. KeyBank charges minimal fees, just a $50 annual fee to keep the credit line open. They will also pay for an appraisal on the property, but they don't do an initial desk appraisal before they order a full appraisal, so I would essentially need to go through the full process with them and commit to them before they do the appraisal and let me know what they value my property at. KeyBank also offers a similar option to lock in up to three different draws at a fixed interest rate like BECU, but they charge $50 to lock and unlock the rate, and their fixed rates are SIGNIFICANTLY higher then the variable rate they offer (it would be over 7% to lock in a fixed rate, and they said that's far lower than it usually is with them). KeyBank will NOT offer HELOCs down the road on rental properties. 

PNC told me that my margin with them based on my credit would put me BELOW the PRIME rate by at least 0.25% (right now that would put me at about a 3.75% APR rate) and could be lower (I haven't officially applied with PNC yet to get pre-qualified). Their variable rate was the best I have been quoted so far. They also just have a $50 annual fee. They do allow you to lock in a fixed interest rate as well, but they charge $100 to lock and unlock the rate. There are no other fees through PNC.

Banner Bank here in Washington is a little bit different. They are actually offering a fixed rate of 4.25% for the first year, OR 4.75% for the first two years. After that first 12-24 months, you have the option to lock in another fixed rate for 1-2 years, or move to a variable rate. They do charge more fees than other lenders I've spoken with ($200 origination fee, and $125 annual fee). 

I'm curious to know what you all think is the most important thing to look at when it comes to these HELOC offers? Should I just be looking for the best margin and the lowest starting point for the variable rate? Should I care about the options to lock in a fixed interest draw (seems like this could be nice to have as an option if rates keep rising)? Is there any advantage to finding one lender to service HELOCs for my primary residence and any future rental properties I own, or should I simply find the best offer right now for my primary residence and then look for other lenders down the road when I am shopping for HELOCs for my rental properties?

Also, why is it that one bank (BofA) is estimating the value of my property to be over $60,000 higher than another lender (BECU)? 

Would love to hear from others ho are HELOC experts on here!

Thanks in advance,

Ryan