HELOC I finally found one!

[Daria B.]

Hi all and thanks BP for all the HELOC posts and answers.

Hopefully this will contribute for others coming in just like I did with no clue how to or what to do.

After calling around to nearly all the local banks, it's a consensus that they only lend on the primary. A shame because I do have a rental that is worth more and paid up.

I found one that I'll be filling out an application for and wanted to find if I missed any questions or concerns before doing this. It doesn't seem so - I've read a lot here and on other financial sites describing the process.

The chosen one is PNC Bank. There is no application fee, no carrying costs, no prepay penalty, no closing costs, min 3yr open on acct, they order the appraisal and if needed, a survey. They also do a credit check, goes without saying. I get a copy of the appraisal. If I decide to sell my house then I just need to pay off the LOC before doing so. Their process will take at least 30 days.

Their draw period like most is 10yr with the remaining 10 as a payback period. The payback is P&I not just interest. When the 10yr approaches I can renew if I wish.

It's 80% LTV and the initial draw is based on 3.49% with remaining draws at the prime rate + margin of .75 (the margin varies and this example was based on 100k).

Other lenders I spoke with had annual fees or initial draw already at 4%. Another lender said that after the initial 10yr draw with the remaining 10-20 payback there wasn't a renew. I didn't quite understand that since all others I spoke with mentioned this 'renewal' of the draw.

Am I missing something here?

Thanks Daria

[Kyle J.]

Hi @Daria B. - A couple more questions you might consider asking before you apply are:

1)  Are there any restrictions on what the money can be used for?  Most banks are going to have some restrictions.  For instance, I've had banks tell me the funds cannot be used for "business purposes", "educational uses", "new property purchase", etc.  There's no way to know what the bank will allow or not unless you ask them.  And I'd suggest asking them before you apply so you don't find out too late that you listed a use that they don't allow.  (There was another post recently by someone who did exactly that and were subsequently denied.)  Anyway, you could list a reason like "to have cash reserves", or whatever might be appropriate in your situation.  The point is, make sure your intended use is compatible with the bank that you're applying with.

2)  Ask them if there is any way to get a discount on the advertised rate.  I've had one bank give me a discount for opening up an account (when I didn't already have one with that bank), and another give me a discount for allowing the monthly payment to be auto withdrawn from a checking account.  The discount wasn't huge (a quarter of one percent), but it was better than nothing and cost me nothing to get it.

Good luck!