Need your help understanding HELOC

[Jaded]

Hi everyone. Just a couple of questions about my mortgage.
My mortgage is due for renewal on June of this year and I'm not sure what would be the best bet for me. I have been reading around a fair amount on mortgages and am trying to understand the SM, the Heloc and so on.
Now I was just reading about the HELOC and I think it's something that I can do and am looking for opinions on that. The appraisal on my home today would be around 200,000. Now I've read that I can borrow up to 75% of the value of my home. That would be $150,000. The current outstanding balance on my mortgage right now is approximately $143,000. The 2 figures aren't very far apart and I guess that's why I'm unsure. So...is this something that I should be considering? Please help as I'm quite confused. Thanks.

[gman]

Hi everyone. Just a couple of questions about my mortgage.
My mortgage is due for renewal on June of this year and I'm not sure what would be the best bet for me. I have been reading around a fair amount on mortgages and am trying to understand the SM, the Heloc and so on.
Now I was just reading about the HELOC and I think it's something that I can do and am looking for opinions on that. The appraisal on my home today would be around 200,000. Now I've read that I can borrow up to 75% of the value of my home. That would be $150,000. The current outstanding balance on my mortgage right now is approximately $143,000. The 2 figures aren't very far apart and I guess that's why I'm unsure. So...is this something that I should be considering? Please help as I'm quite confused. Thanks.

If all they can give you is only $7000, they will not bother to set one up for you. There is cost to set it up. Something like $300. In promotion, they will swallow the cost. Otherwise, you will. I believe there is a minimum of $10K. Hence, they probably won't do that for only $7000. IMO, it only makes sense if you can set up for an amount of at least $30,000.

In short, if there is only $7000, you may as well be still on normal LOC. The $300 cost is not worth it. Since setting up HELOC involves a lawyer, 'usually' every time you need to increase the amount, someone (you or the bank) will need to pay that fee again.

[Jaded]

So would you recommend that I just set up a "normal" mortgage and also apply for a line of credit then? I do have a line of credit with ING of $10000but it currently remains untouched.

[sunnybono]

the alternative is to put your mortgage into the Heloc. So if they give you a Heloc for $150k, then you would payoff your existing first mtg with the heloc which will initially give you $7000 left to use as you see fit. Now suppose you pay off $10k after year one, you mtg balance is dropped down to $133k and your heloc limit is now $17k. Once you pay off your mtg, you will be left with a heloc limit of $150k. As an OP eluded to earlier, it will cost approx. $300 to $400 to set up, but if the financial institution is going to do for free, then go for it. The heloc will cost you nothing if you don't borrow from it, but can come in handy in case of emergencies!!!!!!

sk

[nerd]

Also note that Genworth will insure HELOCs up to 90% LTV. National Bank offers this.

[notanexpert]

I'd like to just add a few things to this discussion. First, most institutions will waive all setup fees if you qualify for a HELOC of 50k or more (since they know they will get a chance to earn their setup fee back!). If thy're running a promotion they will wave fees for smaller lines as well.
Second, getting a HELOC only (no mortgage) is pretty expensive as I haven't heard of anyone getting one for less than prime. Mortgages (variable rate), you can get for about prime -0.9, which is a significant savings.
Third, there are products such as the Scotia Total Equity Plan that will increase your HELOC while you re-pay your mortgage principal with no additional fees. I think other institutions have similar plans as well. Your total maximum borrowings (mortgage + HELOC) is set and that does not change, unless you pay a fee for a new appraisal and legal fees, etc.
You might try that, maybe some institution will bite even if you only have $7k excess equity since they know that amount will increase over time as you pay down your principal.

[Crowbarfoot]

In your situation I would just look for the best rate for your new MTG term. You don't quite have enough equity to take advantage of any home equity products. Most banks will only let you go to 75% of the home value - any MTG on the property. From what I've seen places that let you go up to 90% don't have the best interest rates.

~C

[don242]

Also note that Genworth will insure HELOCs up to 90% LTV. National Bank offers this.

But then you need to pay CHMC fees on top of the other fees.