Exactly three years ago tomorrow (3/31/2014), I opened a HELOC for my 100+ year old home. There is no other mortgage or lien against the property.
At the time I opened it, I had tons of negatives on my credit report, primarily due to defaulted studen loans that I had rehabbed, but the lates were all still showing on my reports. My scores were in the 623 - 663 range, I believe. My home needed serious work -- and by 'serious work', I mean the kitchen was essentially non-functional and nasty, etc. -- and with home sales in the dumper here at the time, I had a hard time finding a place that would place a useful valuation on the place so that I could get a loan to fix it up.
PNC Bank to the rescue. They used some mystical formula and valued my home at what I thought was more than fair, and even with my credit scores, managed to offer me an interest rate of 3.79%. Their HELOC product has a ten year draw period, followed by a 30 year payoff period. They offered me a line of credit that was well above the 80% point of the valuation, but I only took 80%. I spent nearly every penny of the line of credit to make much needed improvements here (it was SO worth it), and since that time I have paid it down about 10%. In other words, my balance is 90% of the original line of credit. They have been great to deal with the past three years.
So here's the situation: With my higher scores and better financial situation, I believe I can refinance at 3.24%. I should be able to get a higher valuation for the property (home sales are MUCH better here now, plus I have added a fabulous kitchen, new garage, doubled my lot size and put up a privacy fence since the initial HELOC), which will give me more breathing room (and probably allow me to fix the one remaining horror-spot: the bathroom). It would also have the added benefit of restarting the clock on the 10 yr draw/30 yr repayment clock.
There are no fees for doing a refinance. It will cost me nothing.
My question: Am I missing something fundamental here? Am I overlooking something basic that would make this a bad idea?
Well, I just found out today that they're offering me 2.99%. That's Prime minus .26%. Not too shabby.
I'm not sure what that means. Can you elaborate? Thanks!
Well there ya go! I learned some valuable terminology!
My current index/margin is Prime + 0.54%
The new index/margin is Prime - 0.26%
I'm very, very pleased with my relationship with PNC. It's been completely trouble-free. And they were willing to work with me when my primary bank (a 40 year relationship) wasn't. It was a painless process, which means a lot to me.
