Where readers ask and we (the community) try to answer:
Question for any mortgage experts out there. I have a large heloc line. If I don’t use the line, I am at risk that the bank will decide to take it away. If I use the line (even if I keep it in cash), can the bank call me on it (i.e., slash the line anyway and tell me to pay it back)?
For the readers out there that follow the comments, you’ll know this question came up yesterday, but as we know only about 10% of you actively participate in comments, we thought we’d put this to the front and fish for some more (not necessarily better) answers.
Mortgage experts? This one is for you….
One reply yesterday from our very own “the Banker”
Great question. Draw the money and draw it today. It certainly depends on your equity situation and the neighborhood/city that you live. But, it is far better to pay the interest for a few months as opposed to having the line freeze up. If the lending standards lighten, then perhaps you cost yourself some “mortgage interest,” perhaps a writeoff, unless you exceed the cap.
Until, there is truly resolve, banks will continue to constrict. But, look for my next post, perhaps this housing bill may make a little sense.
Any other experts, please answer in the comments below.
I had my HELOC taken drastically reduced by 75% three weeks before I was going to draw on it to help fund my down payment on a house. It was a nightmare, I never thought it would happen to me and cost me and my wife a lot of sleepless nights. It took two weeks of phone calls, appraisals and frustration before I was able to get it back in full.
To anyone who hasn’t done so, draw your credit line in full and do it right now. It’s worth paying tax-deductible interest when the rates are so low in order to keep your line from being frozen or reduced.
There have been some interesting articles in SFGate about this. Here’s one for example.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/09/RER213SIKQ.DTL&hw=equity+line+bank&sn=007&sc=544
BTW I put my HELOC funds in my Wells Fargo checking account which pays higher interst than my schwab money market.
Once you draw the funds from your HELOC the bank can’t ask for repayment (other than timely payment of interest).
I agree- if u need (or think you may need) the money, withdraw it now. I did that last year with the remainder of a $500k line. It’s really cheap money now, as my int rate is <3%, and I can get close that with a MM acct.
I’m sure citibank hates the idea of giving me so much cash at sub 3%, but I have it! I suggest you do the same if it’s important to you.
I am surprised you still have it. As an appraiser, I can’t tell you how many calls I have fielded from folks who have had their line frozen. Happened to me too. I heard National City was freezing lines so I took all my money out. Sure enough, a few weeks later I got the letter. They wanted me to pay $700 to one of their appraisers to reinstate it. Some banks are better than others at reinstating but it will involve an appraisal and not having lost equity.