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I'm considering a HELOC for some home improvements but I believe prime will rise in the not too distant future, making a variable rate loan a risky proposition.
TD Bank has a fixed rate HELOC option (this is still a HELOC, not Home Equity Loan) with a 15 year fixed rate of 4.49%. There is only a $99 loan origination fee and a $50 annual fee after the first year. Principal will be repaid on the fixed rate option during the draw period. There is no early repayment penalty and the line of credit can be terminated with no penalty after three years.
Seems pretty attractive. Has anyone elected for a similar loan recently? How did your terms compare? Any potential pitfalls?
That's actually roughly equivalent to a 5.63% rate. Not horrible as far as loan rates go, but it's something to be aware of. With an annual fee, the less you borrow, the higher your effective rate becomes(Extreme example, borrow only $1 and you're paying a rate of 5600%). At the same time, the reverse is true and as you borrow more, the fee becomes a smaller portion of your interest.
$25,000 @ 4.5% = $1125/yr + $50 fee + ($99/15) = $1181/yr in interest/fees. Which is only a 4.72% rate.
Just keep in mind that no matter what, you'll always be higher than 4.5% because of fees.
Edit: I just realized there's no $50 for the first year, but you get the point. I just don't feel like redoing the numbers.
Thanks for the response. I realize the fees to affect the bottom line. But with the potential for prime to increase, especially with the presidential election less than two years away, 4.5% seems like a fairly aggressive rate, no?
The reality is that I'd take fairly large cash draw to pay for a room addition (approximately $45K), and then repay the loan as aggressively as possible. Once repaid, I'd close the HELOC.
Thanks for the response. I realize the fees to affect the bottom line. But with the potential for prime to increase, especially with the presidential election less than two years away, 4.5% seems like a fairly aggressive rate, no?
The reality is that I'd take fairly large cash draw to pay for a room addition (approximately $45K), and then repay the loan as aggressively as possible. Once repaid, I'd close the HELOC.
I'm considering a HELOC for some home improvements but I believe prime will rise in the not too distant future, making a variable rate loan a risky proposition.
TD Bank has a fixed rate HELOC option (this is still a HELOC, not Home Equity Loan) with a 15 year fixed rate of 4.49%. There is only a $99 loan origination fee and a $50 annual fee after the first year. Principal will be repaid on the fixed rate option during the draw period. There is no early repayment penalty and the line of credit can be terminated with no penalty after three years.
Seems pretty attractive. Has anyone elected for a similar loan recently? How did your terms compare? Any potential pitfalls?
Tipsy
How much equity do you have in your home? Will you need at least $25K?
Try Penfed. Their 5/5 HELOC product is 3.75%. Not fixed for 15 years but you will be good for 5 years before rate is adjusted.
How much equity do you have in your home? Will you need at least $25K?
Try Penfed. Their 5/5 HELOC product is 3.75%. Not fixed for 15 years but you will be good for 5 years before rate is adjusted.
Equity is close to 50%. Yes, I'd likely need about $40K. I'll have a look at Penfed.
I spoke to a couple of lenders and refi doesn't seem like the right way to go. I'm currently at 3.25%. The rates I've been quoted have been higher than that. With several thousand in closing costs, it doesn't make sense when compared to the fixed rate HELOC.
Tipsy
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