Interest Heloc

HELOC Calculators

2010-02-06T12:45:00.000-08:00

HELOC Calculators
An online HELOC calculator will help you get a relatively reliable idea of how much money you will pay each month for a home equity line of credit, but since these are revolving accounts with variable interest rates it’s important to remember the payments may change.

What is an Online HELOC Calculator?
Online calculators can estimate the monthly payments on a variety of loans and revolving accounts. These calculators are offered online by lending companies and information financial websites. You will need some information for the calculator before you can receive a reliable estimate of your monthly payments:

The amount of money you will borrow
The interest rate you expect to receive
The value of your home
How much money you currently owe on the home

There are also calculators available online which will help you estimate how much money you should pay each month in order to pay off a HELOC by a certain time. For example, if you want to know how much quicker your home equity line of credit will be paid off if you pay and additional fifty dollars a month, an online calculator can forecast this as well as revealing how much money in interest charges you will save by making the extra payments. You can also find calculators online which will allow you to compare HELOCs and fixed interest rate home equity loans to see which one makes more sense for your situation.

Revolving HELOC Accounts Explained

A revolving home equity line of credit account is similar to a credit card account. As you make payments the balance reduces, but you’re able to make additional purchases and this increases the balance and consequently also increases the monthly payments. The amount of monthly payments predicted by an online calculator is only for a specific amount and is subject to change as you make additional purchases on the account.

Variable Interest Rates

A home equity line of credit is usually assigned a variable interest rate, and this means that the predicted payment from the calculator will always be subject to change.
Many lenders offer an introductory interest rate which will remain in effect for a certain period of time, but chances are you will not find a HELOC with a fixed interest rate beyond the introductory period

Find HELOC Calculators Online

There are plenty of online home equity line of credit calculators to choose from. Here is a brief listing of some popular selections:

If you plan on opening a HELOC with a particular lender be sure to check out the calculators offered on the lender’s website.

Special Circumstances

Before filling out a HELOC calculator online at a lender’s website, you should make sure that your circumstances actually qualify you for the interest rate advertised within the calculator. HELOCs can be tricky accounts, and interest rates are usually higher than the advertised interest rate in a few circumstances:

The loan-to-value (LTV) of your home is more than 80%. In other words, the total of all mortgages on your home is more than 80% of what your home is worth. Many lenders offer HELOC accounts to homeowners with higher LTVs, but the interest rate is higher.
You do not live in the home. Investment properties and other non-owner occupied homes will usually have a higher interest rate for a HELOC than a primary residence will.

Each lender sets their own interest rates and regulations for home equity lines of credit, so it is important to pay attention to each lender’s specifications. Do not assume that just because a lender’s website pre-fills an interest rate into the online HELOC calculator that this means you are assured that interest rate.

The Benefit

Using an online calculator before applying for a HELOC can help you go into the process more informed about potential payments than if you had simply jumped into the process without doing any research beforehand

Six HELOC Strategies for a Rising Interest Rate Market

2010-01-31T17:17:00.001-08:00

Six HELOC Strategies for a Rising Interest Rate Market
I found this nice article from smashits website and thought would be a good post. From Author Tim Paul...

Most home equity line of credit (HELOC) loans are indexed to the bank prime loan rate. This means that when the prime rate changes, the rate on your HELOC loan will change too, typically within a few weeks time.

When prime increases 100 basis points (one full percent) the typical home equity line of credit borrower with a $30,000 balance, pays an additional $300 in yearly interest costs. If you make monthly payments according to a fixed schedule, the rise in rates also means less of each payment dollar goes towards reducing principal. In other words, it will take longer to pay off the loan balance. Interest rates seem likely to continue rising (at least in the short run), so it is worthwhile to look at some strategies available to HELOC borrowers to help control the damage to their wallet:

1. 0% Balance Transfer Offers - If you have good credit and are attentive to details, transferring some or all of your HELOC debt to a 0% credit card can be a viable strategy. You can ride the 0% offer until it expires knowing that you can always payoff the balance with a HELOC check (effectively transferring the balance back to the HELOC). A few downsides of this strategy are:

a) minimum monthly payments will be 2% - 3% of the balance which may be higher than the minimum payment for an interest-only HELOC;
b) you must be on top of all the details related to the 0% offer. For example, Discover offers a "0% for life" balance transfer, but you must be certain to make a minimum number of purchases each billing cycle to keep the 0% rate. Trip up and your rate can immediately skyrocket to double-digits; and,
c) most offers have a balance transfer fee associated with them. Typically, the fee is 3% - 5% of the transferred balance with a maximum (e.g. $50.00). Be sure you know exactly what the transfer fee is and that the interest savings you expect to realize will easily offset it. It is worthwhile calling the credit card company to discuss their balance transfer fee. Account reps often have discretion to waive the fee if they think doing so will close the deal.

There's no free lunch with this strategy, but if you are willing to put in the effort, you can realize significant interest savings.

2. You can also refinance or roll your HELOC into a fixed rate home equity loan or your first mortage . This will protect you from further rate increases - but can backfire if rates fall again. In the current market, longer-term fixed rate loans have not risen in step with increases in the prime rate. This makes this an attractive option for some.

A key factor if you are considering this move is to carefully analyze the up front closing costs of the refinancing transaction and determine whether you will remain in the home long enough to recoup these costs through interest savings.

3. Perhaps the simplest, most effective strategy is to inventory your cash assets and pay down the debt. If you have cash sitting in CD's, money market accounts or other investments earning less than the rate on your HELOC, consider using that cash to pay down the interest-accruing balance on your HELOC. You can still get the funds out in an emergency by simply writing a HELOC check.

Be sure you consider the effective after tax rate on your HELOC when comparing rates.

4. Review the terms of your HELOC with your banker. Things you should be familiar with include the specific index and margin used (e.g. prime rate -.25%), frequency of rate changes - monthly, quarterly, etc. (less frequent is better when rates are rising), and the lifetime cap on your rate.

If you have had the same HELOC for several years, you might find you a have a relatively low cap. Some HELOCs originated 4-5 years ago have lifetime caps as low as 7%. Also, find out if your HELOC permits a conversion to a fixed rate home equity loan with little or no closing costs.

5. Ask your lender if there are any rate discounts available. For example, some credit unions offer to discount your rate by a quarter percent (0.25%) if you have monthly payments automatically deducted from a checking account. Other discounts may be available if you have a significant service relationship (e.g. checking, savings, CD, business accounts, etc.) with the bank.

6. Look for a better HELOC deal. The market remains very competitive with many lenders offering sub prime rates with low or zero closing costs. Shop the internet and shop your local lenders to find the best HELOC deal. And don't be shy about letting your current lender know that you are shopping - if you have a banking relationship they value, you may find them very willing to give you special consideration.

Rising interest rates are a cyclical fact of financial life. The good news is that even with recent increases, HELOC rates are still at historically low levels. Furthermore, the tax-deductibility of interest keeps the HELOC loan the most cost-effective method of borrowing for the savvy consumer.

Secured Debt Consolidation Loans: your All-in-one Solution!

2010-01-03T16:21:00.000-08:00

Secured Debt Consolidation Loans: your All-in-one Solution!
Debt consolidation is something we all need today. Debt is something everybody faces today. Itâ€™s no longer that taboo topic we all thought impossible. Pending bills, gas, store and credit card dues, outstanding house and car loans, etc. are financial responsibilities we all come across in everyday situations. But when all such expenses pile up, they can get quite out of control, making your financial state of affairs unmanageable. This is where Secured Debt Consolidation comes in to solve your problem.

Debt Consolidation Loans are all-in-one solutions. These are loans that help pay off your consolidated debt. When you approach an agency for Debt Consolidation Loans, they instantly talk of consolidationâ€”a process in which all your existing dues are accumulated and merged into one single outstanding amount. The Consolidation Loan that the agency approves is then used to repay the entire pending amount in one lump sum. All you now need to do is repay the single consolidation loan to the consolidation agency.

The process is very simplified and easy to comprehend, but it goes through the entire rigmarole no doubtâ€”collateral, security, verification, valuation, approval, etc. Debt Consolidation Loans are either secured or unsecured. Both have their benefits and drawbacks and cater to distinct category of individuals.

Secured Debt Consolidation works in the same way that Consolidation Loans are supposed to work. The only difference being the requirement of collateral. Secure Debt Consolidation Loan require takers to place collateral of a certain value as security to guarantee repayment of the consolidation loan. Collateral is usually offered in the form of your home, automobile, etc. For those of you who do not have collateral to pledge or do not want to risk it, there are unsecured debt consolidation loans for you.

With Secured Debt Consolidation Loans, an individual must first produce details of all his/her outstanding debt. This debt is then consolidated into a single unpaid amount. This amount is repaid with the Secured Debt Consolidation Loan. I am sure you're wondering how this worksâ€¦

Instead of paying monthly instalments to all your individual lenders, store owners, credit card companies, etc., you now make a single pay check to the consolidation agency. They in turn make your individual repayments for you. You are instantly saved all the running around, you can avoid those harassing reminder calls, collection visits, etc.

The interest rates for Secured Debt Consolidation Loans are relatively lower than their unsecured counterparts. The secured versions also have longer repayment terms and flexible repayment options, making your loan experience much more enjoyable and easy. All you have to do is find the right lender who can offer you a Secured Debt Consolidation Loans tailored to your financial need.

Reverse Mortgages - Are they right for you?

2009-12-27T13:55:00.000-08:00

This is a guest post from Francine Huff, a freelance journalist and writer at BestReverseMortgage.com and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows. Visit her web sites Huff Writes and Super Savvy Spender.

Whether through recent news articles or over the water cooler, you’ve probably heard something about reverse mortgages. But if you (or a loved one) is considering this type of loan, don’t base your opinion on hearsay. For such a major financial decision, it’s worth getting the facts about reverse mortgages. This type of mortgage can actually be a valuable option for people in the right circumstances and who understand the terms of the deal.

Reverse mortgages convert home-equity into cash
What is a reverse mortgage? If you own a home and are 62 or older, a reverse mortgage is a way to convert some of your home equity into cash. Rather than make monthly payments to your lender, your lender is making payments to you. The money you borrow through a reverse mortgage is paid back, with interest, when you move out of your home, sell your home, or die.

The older you are and the more valuable your home, the lower the interest rate you can get in a reverse mortgage — meaning you can borrow more money.

Why and how do people use the money borrowed through a reverse mortgage? Cashing out home equity in this way can be helpful if you have a fixed income and need more money to pay for household bills, debt, medical costs, home repairs, or other expenses. The money from a reverse mortgage can be paid out as a lump sum, in regular payments, or as a line of credit.

Unlike with traditional mortgage loans, your credit history does not matter with a reverse mortgage. However, the house must be your primary residence, so vacation homes and investment properties do not qualify.

Effect on taxes and government program eligibility
If you’re concerned that the additional money will boost your income tax liability, don’t be. Money obtained through a reverse mortgage loan is not considered taxable income. You also keep the title to the home and can never be forced to move as long as you pay the property taxes and insurance. If you and your spouse take out a reverse mortgage together, the loan isn’t due until both spouses have moved or died.

If you receive regular Social Security or Medicare payments, they won’t be affected by taking out a reverse mortgage. However, your eligibility for Medicaid payments could be affected. Money received from a reverse loan may be considered an asset and could keep you from getting Medicaid.

For example, if you receive $4,000 from a reverse mortgage and spend it all the same calendar month, you can receive Medicaid, according to the National Reverse Mortgage Lenders Association. If you spend some of it and put the rest in your savings account, that’s where you can run into problems. If your total liquid assets exceed $2,000 ($3,000 for couples) the next month, you wouldn’t be able to receive Medicaid.

Are you a spendthrift?
One of the disadvantages of a reverse mortgage is that getting money this way won’t correct poor spending habits. If you have trouble managing your money, a reverse mortgage won’t solve your financial problems.

For some folks, getting their hands on a large sum of cash may result in poor spending choices that could leave them without enough money for basic living expenses later on. Who hasn’t heard horror stories of retirees blowing reverse mortgage money in record time on expensive vacations, meals, cars, and other frivolous purchases? Anyone who really has a problem with debt and managing money may need to speak with a credit counselor.

Credit counseling differs from reverse mortgage counseling, which is mandatory for most reverse loans. This free or low-cost counseling can be done in person or by phone. The goal of counseling is to get detailed reverse mortgage information to help you decide if using one of these loans is a wise choice. Counseling can help you review other alternatives to getting a reverse loan. Find a HUD-approved counselor to talk through your options. Seniors who use reverse mortgages can reap a lot of benefits, but these loans aren’t for everyone.

Your home appraisal
You may not benefit much from a reverse loan if you don’t have enough home equity. When you apply for a reverse mortgage, your home will be appraised to determine its current market value. The more equity you have in your home, the more money you can potentially receive through a reverse mortgage. After the past year’s market performance, it’s worth noting that no matter what happens with the housing market, the amount owed on a reverse mortgage never exceeds its market value at the time a house is sold.

Just make sure you really want to cash out that home equity. When you own a home free and clear, you can leave it to your heirs without too many restrictions in most cases. But with a reverse mortgage, one of the disadvantages is that if you want your heirs to have the home, they (or your estate) must pay off the loan balance first. They also could choose to sell the home and keep any remaining equity after repaying the lender. If they don’t want the home, they can do nothing and the mortgage lender takes the property.

Reverse mortgage disadvantages: Loan fees
Reverse mortgages usually have a lot of upfront costs, so you may want to consider other alternatives to getting more funds if you plan to move from your home in a few years. Some other ways to improve your cash flow are to redo your budget to reduce expenses, get a home equity loan or no-interest loan from a local government agency or nonprofit, or look for grants for homeowners in your area.

One thing to remember is that the US Department of Housing and Urban Development’s Home Equity Conversion Mortgage (HECM) allows you to use the proceeds from to buy another home as your primary residence. So you can use the money from a reverse mortgage to downsize to a less expensive place.

Get the reverse mortgage facts to help you decide
As more seniors have struggled to make ends meet in recent years, reverse mortgages have grown in popularity. Some consumer advocates and legislators say reverse home loans are heading for another meltdown like subprime mortgage loans. Others believe that these loans have a lot of value and can help seniors live more comfortably in their golden years.

It’s up to you to make the right decision based on your personal financial situation. And don’t let pushy salespeople pressure you into signing up for a reverse mortgage without understanding all the consequences. Talk to a counselor to discuss reverse mortgage facts and whether one makes sense for your needs.

Home Equity Loan Interest - what can you deduct on Your Taxes

2009-10-28T21:48:00.000-07:00

When it is tax time, it is scary for many people as the deadline nears. Reviewing and identifying all of the possible deductions and falling up short of eliminating your tax payment entirely can be a frustrating experience. However, most people are not fully aware of their possible deductions on your home equity loan interest on your taxes?

When you finance any type of loan – be it for your home, your car or a new couch from Sears – you pay interest on the principle of that loan. Loans taken out before October of 1987 on homes are subject to home equity interest tax deductions, which can be your saving grace. Although there are a few restrictions (described below), most people are elligible for this tax deduction.

First of all, you can only deduct home equity loan interest if the mortgage is on your first or second home. This might seem like no big deal, but if you have multiple vacation homes or an excess of real estate investments, those home equity loans do not apply. Further, you cannot deduct interest that is more than the total value of that home. You can read IRS Publication 936 for more information on whether or not your home equity loan qualifies.

In most cases, you are also only allowed to deduct home equity loan interest from the first hundred thousand dollars you have mortgaged. For example, if you purchase a $240,000 home, you can only deduct equity loan interest from the first $100,000, but not the second $140,000. There are a few exceptions to this rule, such as home imprivements, but they are rare.

It is also possible that you will not be able to deduct certain amounts this year, but will have to wait until subsequent years because of amortized payments. For example, if you’ve had your home for nine years, and then take out a second mortgage, you will have to pay points toward that second mortgage. However, that doesn’t mean that you can necessarily deduct those points during the year that you paid them; you might have to wait until they are amortized over subsequent years. However, once your loan has ended, you can deduct all remaining points in that year. You can find more specific information regarding this matter in Publication 936.

In order to deduction your home equity loan interest on your taxes, you will need to itemize your deductions on the Schedule A form, as long as your tax deduction exceeds that of the standard deduction ($4,300 for singles; $7,200 if you are married).

On Schedule A, you will have to provide the name of the company through which you have secured your home equity line of interest as well as the amount of interest you have paid in that tax year. If you have any questions about this process, seek the counsel of a qualified CPA to make sure that you are filling out all of your forms correctly.

Best Line of Credit (HELOC) Interest Rates

2009-10-25T19:57:00.000-07:00

The rates Home equity lines of credit are getting higher and higher and will continue next year as well. If you do not have one already, this is a good time to lock in one if you qualify!

A few months back, a lot of lenders were offering HELOCs with rates of less than 4%. Now only a few of them have deals that are good, and most borrowers will pay a minimum of 4.25%.

The HELOC’s are based on the prime rate — the interest rate banks charge the best commercial customers. This is currently at 3.25%.

The days when we got HELOC rates of Prime rate minus something are gone. Most of the home equity lines of credit are priced around prime plus 1%.

But if you have enough equity in your home, HELOC’s are the best loan you get with the cheapest interest rates.

Here are some of the better deals around:
US Bank, which serves 24 states nationwide, has rates as low as 3.99% and as high as 9.25% in parts of Arizona, California and Nevada – states that have suffered steep declines in home prices. You’re also tagged with a $90 yearly fee.

Third Federal Savings & Loan is charging 3.25% for homeowners in 18 states from Oregon to Florida for loans up to $49,999. For loans of $50,000 – $150,000, you pay only 2.99%. They used to do business in California…not anymore! There’s no annual fee.
BB&T Company, headquartered in Winston-Salem, N.C. with 1,500 financial centers in 11 southeastern states and Washington, D.C., charges 4.25% with no fee and a $5,000 minimum.
Nationwide Bank, owned by Nationwide Insurance, is charging 4.50% with no annual fee.
Viewpoint Bank based in Plano, Texas, with 39 branches serving the north part of the state, offers 4.5% with no annual fee and a $4,000 minimum.
First Tennessee Bank, owned by First Horizon National Company, with branches in Arkansas, Georgia, Mississippi, Virginia and Tennessee, charges 4.25% with a $5,000 minimum and a $50 annual fee.

To qualify for one of these HELOCs you need:
A credit score of around 660 or more, with the exception of Nationwide Bank and Third Federal Savings, which require a minimum score of 720.

To retain 20% equity in your home after the line of credit is added on to the balance of your primary mortgage.

Consolidate Debt and save money with low HELOC rates

2009-06-27T18:30:00.000-07:00

These days you can get a home equity line of credit (HELOC) with a rate under 5.00%. HELOC’s are usually tied to the prime rate which is currently 3.25%.

Most banks will offer a HELOC rate with plus or minus 1.00% of the prime rate depending on your credit score. Though with rates at historic lows you will be hard press to find a bank offering prime minus 1.00% these days. We were recently quoted a HELOC rate of 4.25% from Citibank for a loan modification.

Getting a HELOC at 4.25% to payoff credit card debt at a lot higher interest rate makes financial sense. Especially if the credit card rate you are paying is in the double digits or higher, which we all know is actually the norm.

Though with a HELOC, rates are flexible since the rate is tied to the prime rate, so you run the risk of rates increasing. Most HELOC’s have a rate hike limit per year and for the lifetime of the HELOC.

You can use our HELOC/home equity line of credit calculator to see if consolidating your credit card, auto and other loans will save you money.

HELOC Interest - How it is calculated!

2009-06-11T09:18:00.000-07:00

Interest on a HELOC
Because the balance of a HELOC may change from day to day, depending on draws and repayments, interest on a HELOC is calculated daily rather than monthly. On a 6% HELOC, interest for a day is .06 divided by 365 or .000164, which is multiplied by the average daily balance during the month. If this is $200,000, the daily interest is $32.88, and over a 30-day month interest amounts to $986.30; over a 31 day month, it is $1019.18.
In contrast, on a standard 6% mortgage, interest for the month is .06 divided by 12 or .005, multiplied by the loan balance at the end of the preceding month. If the balance is $200,000, the interest payment is $1000, regardless of whether there are 30 or 31 days in the month -- or 28.

APR on a HELOC
Don’t compare the APR on a HELOC with the APR on a standard loan because they mean different things. The APR on a HELOC is the interest rate, period. Among other things, it does not reflect points or other upfront costs, as the APR on standard loans does. Requiring lenders to show the interest rate on a HELOC twice is a strange way to protect borrowers, but there it is.

Advantages of HELOCs
HELOCs are convenient for funding intermittent needs, such as paying off credit cards, making home improvements, or paying college tuition. You draw and pay interest on only what you need.
Upfront costs are also relatively low. On a $150,000 standard loan, settlement costs may range from $ 2-5,000, unless the borrower pays an interest rate high enough for the lender to pay some or all of it. On a $150,000 HELOC, costs seldom exceed $1,000 and in many cases are paid by the lender without a rate adjustment.
Some HELOCs are convertible into fixed-rate loans at the time of a drawing. This is a useful option for borrowers who draw a large amount at one time.

The Risks of a HELOC
The major disadvantage of the HELOC is its exposure to interest rate risk. All HELOCs are adjustable rate mortgages (ARMs), but they are much riskier than standard ARMs. Changes in the market impact a HELOC very quickly. If the prime rate changes on April 30, the HELOC rate will change effective May 1. An exception is HELOCs that have a guaranteed introductory rate, but these hold for only a few months. Standard ARMs, in contrast, are available with initial fixed-rate periods as long as 10 years.
HELOC rates are tied to the prime rate, which some argue is more stable than the indexes used by standard ARMs. This is an illusion, however, arising from the fact that the prime rate doesn't change from day to day. In 2003, it changed only once, to a low of 4% on June 27. However, in the next three years it changed 17 times, by .25% each time, reaching 8.25% on June 29, 2006. In 1980, it changed 38 times and ranged between 11.25% and 20%.
In addition, most standard ARMs have rate adjustment caps, which limit the size of any rate change. And they have maximum rates 5-6% above the initial rates. HELOCs have no adjustment caps, and the maximum rate is 18% except in North Carolina, where it is 16%.
The financial crisis that erupted in late 2007 revealed another risk in HELOCs, which is that the lender has the right to cut an unused credit line. With property values declining during the crisis, many lenders did this, with the result that the borrowers found that they did not have the loan commitment they thought they had.

Interest HELOC – Deduction limits on HELOC interest

2009-06-05T15:07:00.000-07:00

Home mortgage interest is deductible as an itemized deduction depending on various thresholds and whether it is to purchase or cash out on a refinance.

First home mortgage debt incurred to purchase a primary and second residence is deductible, provided the total acquisition debt is less than $1 million. In your case, you borrowed $99,000 or less. You would still have the ability to borrow and deduct the interest on another $901,000 in debt if you acquire a second residence.

When you refinance acquisition debt or take out additional debt such as a HELOC, you can deduct the interest on such debt if you use it to improve your residence and on up to an additional $100,000 that you can use for any purpose, except for the purchase of tax-exempt securities such as municipal bonds. If you use the $100,000 to buy a second home, then it gets thrown back into the $1 million pot.

In your case, you already borrowed $100,000 but did not state what it was for. If you used the $100,000 to purchase investments, you can claim the interest on the mortgage as either home mortgage interest or investment interest.

If you use it to take an around-the-world trip, then you can claim it only as mortgage interest.
Interest on borrowings in excess of the $100,000 would not be deductible unless it's for business or investment purposes, which would not be the case if you borrowed to purchase a new auto, unless some of the prior $100,000 was for improvements or investments. For example if you used $20,000 of the prior $100,000 to make improvements to the condo, then you could borrow up to an additional $20,000 to purchase the car and claim the interest as mortgage interest.

Interest HELOC – Risks of HELOC

2009-05-26T10:46:00.000-07:00

A lot of people use HELOC to buy real estate property for investments including me. One benefit will be that the interest you'll be paying on that HELOC will be tax-deductible. Sometimes people use a HELOC to finance a lifestyle that is beyond their means (expensive travel, vehicles, plasma TVs) - strictly speaking the interest on a HELOC used this way will not be tax-deductible.

Getting a HELOC is easy if you have equity in your home. The following are the risks associated with it:

HELOCs are often structured as interest only, thus you are not paying down the principal. Look at your bank's statement when you your payment-due notice. Does it include any principal? It's a good idea to pay a little more whenever you can afford it.
As the Fed raises the interest rate, HELOCs follow. My credit union’s term is that the HELOC rate gets adjusted on the next first of the month after the FED adjusted the prime rate. At the time of writing (summer 2005) this is not a time to hope for falling interest. Most experts expect at least two more hikes of 0.25% each. This means your minimum payment will rise.
You lose equity in your house and may even end up 'upside down'. That is if you own a house worth $500,000 and you have a mortgage of $300,000 on it and a HELOC of $100,000. Now your total balance is $400,000. Let's say you need to sell the house and the price drops by 20% to $400,000. Then there is 6% real estate agent commission to be paid. That alone will be $24,000. I won't even add in the cost to clean the house / make it ready for a sale. $400,000 sale price / $24,000 transaction cost / $376,000 first mortgage / $100,000 HELOC equates to a ngative $76,000. Now imagine what happens if the house price drops by more than 20%. Not unrealistic at all.

However a HELOC is a good idea when you need to pay off credit cards (debt consolidation) since the interest rate is so much lower. Just make sure to change your spending habits or you'll need a second (or bigger) HELOC soon.

Also know that if you obtain a HELOC of $100,000 and you don't actually take out all the $100,000, maybe you only take out $12,000. If someone pulls your credit and looks at your loan-to-value ratio, they count your HELOC as $100,000 (because that's how much of a lien is against the property). It does not help you much that you only use $12,000 of the $100,000 line.

Interest HELOC – What is Prime rate? And the current value

2009-05-21T11:12:00.000-07:00

The prime rate, as reported by the Wall Street Journal's bank survey, is among the most widely used benchmark in setting home equity lines of credit and credit card rates. It is in turn based on the fed funds rate, which is set by the Federal Reserve. The COFI (11th District cost of funds index) is a widely used benchmark for adjustable-rate mortgages. The prime rate varies little among banks, and banks generally make adjustments at the same time, although this does not happen with frequency. The prime rate is currently 3.25% in the United States. Canadian prime rate is currently 2.25%

Ratings methodology
What's included? The fed funds rate is the primary tool that the Federal Open Market Committee uses to influence interest rates and the economy. Changes in the fed funds rate have far-reaching effects by influencing the borrowing cost of banks in the overnight lending market, and subsequently the returns offered on bank deposit products such as certificates of deposit, savings accounts, and money market accounts. Changes in the fed funds rate and the discount rate also dictate changes in the Wall Street Journal Prime Rate, which is of interest to borrowers. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Many small business loans are also indexed to the Prime rate. The 11th District Cost of Funds is often used as an index for adjustable-rate mortgages.

Interest HELOC – HELOC vs. Home Equity Loan

2009-05-12T09:21:00.000-07:00

This is always a question when someone wants to tap into his or her Home Equity. You have two major home equity options for borrowing money: the home equity loan and the home equity line of credit (HELOC). Both options allow homeowners to take out a loan based on the existing equity in their property. In both cases, the property is used as collateral and may be foreclosed upon should the borrower default on the loan.

Home Equity Loans
Home equity loans are given out in a single lump sum. The borrower walks away with a check for the total amount. Home equity loans have a fixed interest rate for the life of the loan – the borrower knows exactly how much his monthly payments will be ahead of time. Home equity loans are often a smart choice for borrowers who need upfront money for expenses such as credit card debt consolidation or a huge medical bill.

Home Equity Lines of Credit (HELOC)
A home equity line of credit (HELOC) is similar to a credit card. Instead of being handed a single lump sum amount, a borrower can withdraw from the line of credit whenever they wish to withdraw money. HELOC’s generally have a set draw period between 5 and 10 years. After the draw period, the borrower must either pay back the balance in full (a balloon payment) or enter a 5 to 10 year repayment period. HELOCs have variable interest rates generally tied to the national prime rate. That means, a borrower’s monthly interest charges may change from month to month. HELOCs are often a smart choice for borrowers who want to have a reserve for emergencies or need money for ongoing projects such as home renovation.

A simple Comparison Chart
Home Equity Loan
Closing costs is normally in several hundred dollars.
Fixed interest rate for life of loan.
Loan is paid back via equal monthly payments like a regular loan.
Interest is charged on entire amount of loan.
Interest is tax deductible in most cases Interest is tax deductible in most cases

HELOC
Very low or no closing costs
Variable interest rate, changes regularly.
Loan can be paid however the borrower wants to during the period of the loan but is generally paid back in a single balloon payment or 5-10 year repayment period.
Interest is charged only on the money withdrawn.
Interest is tax deductible in most cases

Choosing a Loan
Both HELOCs and home equity loans have their own pros and cons. The best loan for you is determined based on your needs. Take into consideration what the money is needed for, as well as your financial ability to deal with variable rates.

Interest HELOC – Rates and Terms you should know before you get a loan

2009-05-06T10:03:00.000-07:00

A HELOC may seem like a simple loan but there is lot of different factors that you need to pay attention to. You will end up paying unnecessary fees or being charged a huge markup if you do not pay close attention. This article shows you how to watch out for common lender “tricks” and negotiate the best HELOC rates and terms.

HELOC Margin
The margin is the most important thing you should look for when shopping for a HELOC loan. Basically, the margin is the difference between the index rate and the interest rate the borrower will be charged. Most of the HELOC lenders use the prime rate as an index. Consider this example: if a borrower is given a 1% margin, he will always be charged 1 points above the prime rate. If the prime rate is at 3%, his interest rate will be 4%. If the prime rate is at 9%, his interest rate will be 10%.

HELOC interest rates are always adjustable rates. A borrower’s interest rate will be changing throughout the life of the loan. The margin, on the other hand, will always stay the same. Sometimes the margin is not included in the HELOC’s APR. Many HELOC loans come with an introductory rate for the first few months. It is not uncommon for this introductory rate to be used in determining the APR. When the introductory period is over, the borrower will be charged the actual interest rate. Creditworthy borrowers can sometimes find HELOCs at the prime rate (0% margin) or even less. Those with poor credit may find that they are given an extremely high margin (7% in some cases).
The margin is not always published. To determine what your HELOC margin is, you must ask the lender.

Watch out for the Hidden HELOC Fees
It is possible to take out a HELOC without paying any fees at all. However, unexpected charges have a way of sneaking into loan documents. When applying for a HELOC, make sure that you won’t be responsible for these unnecessary fees:
Application fee. Many lenders do not charge a fee for applying. If your lender does, they should be able to refund the money at closing.
Appraisal charge. Someone has to pay for an appraisal to be done, but most lenders will absorb this cost themselves.
Closing costs. Closing costs are common for many home loans, but not for the home equity line of credit. Don’t agree to pay closing costs, sometimes called “lender fees.”
Check fees. You shouldn’t be charged extra every time you withdraw from your credit line – you’re already going to pay interest on the amount you take out.
Annual fee. This line of credit will be open for 5, 10, or even 20 years. Annual fees can really add up - don’t get stuck paying extra money each year.
Inactivity fee. If you choose to save your credit line for emergencies, don’t let the lender punish you. The inactivity fee can almost always be waived.
Repayment penalty. You should never be penalized for paying off a line of credit before the end of the term – that’s the beauty of choosing a credit line over a more traditional loan.
Cancellation fee. It can be more difficult to get the cancellation fee waived, but it’s worth a shot. If your lender insists, you may be out about $500 should you choose to refinance or sell your home during the life of the HELOC.

Additional HELOC Features that you should look into
Many home equity lines of credit come with “special features” that benefit the borrower. You may not be able to have everything on this list added to your HELOC. But, it’s worth it to ask.
Lifetime interest rate cap. This is the maximum amount that your interest rate can adjust to during the life of the loan. Don’t accept a cap that is so high you will not be able to make the monthly payment.
Periodic interest rate cap. Few HELOCs offer this feature, but it’s one to look out for. If you know that your interest rate can only adjust so high during a certain time frame (i.e. a year), you won’t be surprised by a skyrocketing bill.
Interest-only payments. Many HELOCs allow borrowers to make interest-only payments during the draw period. You may not want to use this feature regularly, but it’s good to have in case of emergency.
Fixed-rate conversion. A few lenders allow borrowers to convert withdrawals to a fixed interest rate. When you take out a sum of money, you can specify the preferred term of the fixed-rate loan (5 years, 10 years, etc). This is an especially comforting feature for borrowers concerned about rising interest rates.
Low introductory rate. Most HELOCs come with an introductory rate – the lower, the better.
Long introductory term. Try to push for a long introductory term. That way you’ll be able to maximize the benefits of the lower interest rate.

By familiarizing yourself with the basic features and fees involved in HELOC loans, you’ll be prepared to make smart choices for your financial future. Make sure you present yourself as very knowledgeable when talking to the lender – the more questions you ask, the more able you’ll become to make an informed decision.

Interest Heloc – Why it is the best loan you can get!

2009-05-01T20:33:00.000-07:00

If you are among the few people who have equity in their house and are eligible to get a Home Equity Line of Credit loan, get it right now! And get the maximum limit the bank is willing to give you. It is absolutely the best type of loan out there in many ways. Here are some of the great advantages of a Home Equity Line of Credit (HELOC).

You will not have to pay any interest if you do not withdraw any cash from it.
Once you get the line of credit, you can draw from it anytime you want upto the maximum limit. You will only be charged interest for the amount you draw.
The interest rates for HELOC are very low right now. You can get a loan for Prime rate or sometimes even prime rate – 0.51%. The Prime rate right now is 3.25% for most banks.
Once you get the line of credit, you line of credit maximum draw amount does not go down even if your house value goes down.
All the interest payments are tax deductible.
This is one of the best reasons. It can be your safety net in case you lose your job and have to foreclose your home. Assume your house is worth $400,000 and you have a first loan of $300,000 and $100,000 line of credit on it. Lets say the your house value has gone down to less than $300,000 and you lose your job. You can draw the $100,000 from your HELOC, put it in a bank and then foreclose your house. In this scenario, you will have $100,000 in your bank versus if you did not get a HELOC you would have nothing! This reason alone should make it a no-brainer for you to get this loan!

The only possible (not probable) downside to this is if you draw all the amount and neither lose your job nor your house and the Prime rate goes up in 5 to 6 years (It definitely will not go up before then), you might end up paying a couple of percent more interest. That’s the worst-case scenario which is no so bad at all!

I personally took my HELOC about 2 years ago when my house price still was good and I have a HELOC interest rate of Prime – 1.01% if I withdraw more than $50,000 and Prime – 0.51% if I withdraw less than $50,000. I have drawn about $120,000 from it and pay a interest rate of about 2.24%. Isn’t than a sweet deal!! And as for the $120,000, I have bought other real estate with it with positive cash flows (After paying the really low 2.25% interest). I used Third Federal for my HELOC. Unfortunately, they do not do HELOC for California anymore but they do for other states.

Interest HELOC - No Doc HELOC loans

2009-04-28T22:37:00.002-07:00

Even in these tough credit times, there are no doc HELOC loans and no doc equity loans that are perfect for special situations that have trouble verifying their income. These type of mortgages will not require you to submit a huge stack of documents to prove anything. This is one of the parts of the mortgage process that can be very frustrating.

A lot of people who are looking for a good refinance like no documentation equity loans and HELOC loans because they make the mortgage process faster for them. These loans also can be called stated income loans, which will allow you to state a specific amount as your monthly income and the loan company will not verify this number with tax forms or paycheck stubs.

The banks that offer No Doc heloc all offer different products, but they are usually very similar. There are companies that are in business to deal with those that don't have the best of credit and there are some that deal with only good credit. You can even use a broker, which will give you access to many different types of companies through one broker.

Finding the right lender to give you the no doc, no income verification mortgage loan you want can be a bit difficult. You need to start with a quote from a broker and quotes from at least three mortgage companies. This should be free and if they try to charge you, then you need to avoid that company.

It is highly advisable to shop for your rate, the loan to value, and the fees from one to another companies. Once you have found your lowest quote let the other companies know what deal you are getting and they might match or beat that quote. Then, you need to go with the mortgage company that has the best deal and gives you the best customer service for your no doc HELOC loan or no doc equity loan.

Interest HELOC – Choosing between HELOC interest rates

2009-04-28T22:37:00.001-07:00

What kind of HELOC interest rate did you receive when you established your home equity line of credit? I hope that you did as much research as I did because there are certainly a lot of variables out there amongst the different lenders. I did my homework all right. I found out all about draw periods and repayment structures, fixed and variable rates and a whole host of other terms that I had no idea even existed. Ultimately, I ended up with a HELOC interest rate that was better than what I had hoped it could be and I learned a lot during the process.

Benefits of a HELOC
A lot of folks when they need money for home improvement projects or for paying college tuition first look at how to refinance mortgages that they already have in place. I considered that too, but I found the benefits to a HELOC type of loan too good to pass up. I could draw on the funds over a period of about ten years, instead of having to receive the entire payment as a lump sum. I only had to pay interest on the actual amount I had borrowed, which worked out pretty well, because the addition to my house was going to be spread out over a year or two and it didn’t make sense to me to pay interest on money that essentially would just be sitting in the bank for a year or two.

Interest HELOC – Understanding a HELOC

2009-04-28T22:35:00.000-07:00

A HELOC loan, formally known as a Home Equity Line of Credit, is acquired for a specified amount of time and the loan is on the equity in your house. The main difference between a HELOC loan and a regular loan is that all of the money is not disbursed at one time. Basically, it is a line of credit that can be used accordingly, not to exceed the maximum loan amount (Always to get the maximum limit you can get). It is very similar to using a credit card.

After you have closed on the loan, you will know what your loan amount is. The time that you can use the money is called the "draw period" and it is usually between 2-25 years. Your payments will only be what you have used against the HELOC loan and if you stay within the minimum then you may only have to pay the interest on a monthly payment.

However, if you exceed the minimum then you can decide when and how much you want to pay back. While that may sound great, keep in mind that once the "draw period" is over the full loan obligation must be met. This is done either in a balloon type payment or according to a loan amortization schedule.

It is different from a conventional loan in other respects too. HELOC interest rates vary according to the prime rate. What this means is that the interest rate will change. A word of caution is that all lenders do not calculate the margin the same. The difference between the prime rate and the interest rate determines the margin which is the amount that borrowers pay.

HELOC loans are very popular, especially in the US. Because the interest that is paid is tax deductible on both federal and state taxes has made this type of loan one to seek. More people like these loans because they are also very flexible in the sense that they can be paid back however and whenever the borrower chooses to do so.
Regardless of the terms and the flexibility, the bottom line is that this loan must be paid back, plain and simple. The collateral is your home and if you fail to pay you will face foreclosure. Always keep this in mind when you are considering a HELOC loan.
Are you facing the likelihood of a foreclosure? Do you need help with your debts? Why NOT take advantage of a free consultation with experts?

Interest HELOC – Is a Heloc right for you?

2009-04-28T22:34:00.000-07:00

There are various reasons why someone might need a quick home equity loan (HELOC). Some of the reasons include making home improvements, paying off credit card balances, paying for a college education or buying additional income property or even locking the loan before the price goes down. These HELOC loans can be helpful because the closing costs and interest rates tend to be low and in some cases there are no closing cost. Home equity loans work best in certain circumstances:

1. Loan will be repaid quickly.
This is important as equity in homes can vary over time. In addition, it helps increase the odds of you continuing to get good interest rates if the time period to repay is shorter.

2. Loan is needed for a short-term.
These loans should be used if can be repaid within 15 years or less. Adjustable rate loans are better for short term uses if under 3 years and fixed rate are better for longer periods of time.

3. Buying the HELOC from your home mortgage lender makes sense.
It is a good idea to bundle by getting your home equity loan and mortgage from the same lender because this can save you money. However, you should also pay close attention to fees as these can vary with each lender.

4. Above average rate of interest on the first mortgage.
If the rate is below average, most experts would recommend you opt for refinancing instead of getting a fast home equity loan. The standard for refinancing is normally to refinance if the rate of interest is 2 points or more below the interest rate on the first mortgage.

The above tips should help you figure out if a fast home equity loan is right for you and your family. Simply going through these steps can help you decide whether a home equity loan (HELOC) or refinancing will be a better option.

Interest HELOC: Policies

2009-04-28T22:21:00.000-07:00

I am creating this blog today the 28th of April, 2009 for all homeowners. I will periodically write about home equity line of credit interest rates, best deals, right times to get it, terms etc. I personally have gotten heloc loans 3 times and am very happy with them. I am relatively new to blogging and am learning seo as well. Hope to get a lot of visitors to my site!

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