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Home equity line of credit for future use

DTS
Established Member

Home equity line of credit for future use

1) I may  be eligibel for 150-200K home equity line of credit.  Is it good idea to take line of credit and not use it  now ? Purpose is to use it in case of emergency or I may use after 1-2 years for my kids college fees.

2)  What precautions should be taken before applying   ?  I have +800 in all 3 beauras. Only in Experian I have ONE hard credit enquiry in past 6 months.

 

 

FICO Scres:

Equifax: 838

TransUnion: 829

Experian: 821

 

Message 1 of 7
6 REPLIES 6
frugalQ
Valued Contributor

Re: Home equity line of credit for future use

with HELOC's don't you have a 'draw' period and a pay back period?  If you get the HELOC, you have 10 years to basically take out money...and then 20 years to pay the balance.  I think that's how it works.

 

So, you may want to consider timing of when you will need to use the funds.

AmEx Green NPSL | Amex BCP 16K | Citi Simplicity 10k | Discover IT 9K | Chase Slate 7.5K | Amex Hilton HHonors Surpass 7K | Capital One QuickSilver 6K | Home Depot 5k | Chase Freedom 4.5K | LOC 2.5K
Message 2 of 7
DTS
Established Member

Re: Home equity line of credit for future use

I definitely want to use  within 10 years. So no harm to take HELOC now and use after 2-3 or 5 years.... correct?  Also can you please advise on question #2?

Message 3 of 7
frugalQ
Valued Contributor

Re: Home equity line of credit for future use



I am not familiar with heloc guidelines. I don't know if your idea is a good one or not. Hopefully, someone else will chime in.
AmEx Green NPSL | Amex BCP 16K | Citi Simplicity 10k | Discover IT 9K | Chase Slate 7.5K | Amex Hilton HHonors Surpass 7K | Capital One QuickSilver 6K | Home Depot 5k | Chase Freedom 4.5K | LOC 2.5K
Message 4 of 7
TortoiseWins
Senior Contributor

Re: Home equity line of credit for future use


@DTS wrote:

1) I may  be eligibel for 150-200K home equity line of credit.  Is it good idea to take line of credit and not use it  now ? Purpose is to use it in case of emergency or I may use after 1-2 years for my kids college fees.

2)  What precautions should be taken before applying   ?  I have +800 in all 3 beauras. Only in Experian I have ONE hard credit enquiry in past 6 months.

 

 

FICO Scres:

Equifax: 838

TransUnion: 829

Experian: 821

 


I'm happy to talk with someone about a HELOC. There's so little action on them around here. I am signing on mine today (I have a thread with the saga that starts with US Bank...). 

 

Most I've seen are 10 year draw/20 year re-pay, but not all. Most do to 80% LTV, some only to 75% and some to 90%. 

 

If you would be eligible for less or if your scores were worse, I could see waiting for the house to appreciate or your scores to come up, but both seem good on that front. As long as you think the draw period would be a good time period for you. 

 

A couple quirks I've found in my research on HELOC's are that it seems like sort of a crap shoot as to how it will report. I've read that if the CL is over some secret magic number $40k or $50k it'll report as a mortgage/installment loan, but if it's less it reports revolving like a CC. I believe this is based on CL and not the amount used, but I've read so much conflicting stuff that I don't know what to believe. The bank manager told me that for them it reports one way to two of the CRBs and the other way to the third. But he had to go through two levels of UW to get that answer, and he sounded sort of tentative on it. I'm not even sure if it's up to the Bank or the CRB how it's reported/interpreted. I'm going to roll the dice and see what happens. Mine will be $70k, so hopefully installment. 

 

I also found it interesting that it's a much simpler process than a mortgage. They did a desk/drive by appraisal (which was a bit low, but I didn't want to push it...I could have asked for a full appraisal but I was a bit worn down by then and we may refi the first down the line so I figure a little wiggle room isn't a bad thing.) And they didn't triple pull, but they did use a mortgage fico (EX for us via US Bank). 

 

I look forward to hearing how you proceed. 

Message 5 of 7
SamsungHDTV
Established Contributor

Re: Home equity line of credit for future use


@DTS wrote:

1) I may  be eligibel for 150-200K home equity line of credit.  Is it good idea to take line of credit and not use it  now ? Purpose is to use it in case of emergency or I may use after 1-2 years for my kids college fees.

2)  What precautions should be taken before applying   ?  I have +800 in all 3 beauras. Only in Experian I have ONE hard credit enquiry in past 6 months.

 

 

FICO Scres:

Equifax: 838

TransUnion: 829

Experian: 821

 


1) Yes, great idea. 

 

2) Precautions: You get better terms if there is no current mortgage and the HELOC would be in 1st lien position. Apply, once approved ask what goes into the rate. More specifically, you want to know if the estimated LTV gives you the best rate. Some banks do the higher the line amount the better the rate. Ask for breakpoints. Then once you get a rate, let them do the appraisal so that you have an accurate rate. Then go for it. I don't know who you are applying with but my bank has $50 origination and no closing. If yours is the same, really no reason why not to go ahead with the loan. When your kids go to college, compare your rate with student loan rates. Who knows what they will be when your kids are in college, but they could be cheaper than your rate. 

Message 6 of 7
DTS
Established Member

Re: Home equity line of credit for future use

Thank you. I am much more clear now. Will keep you updated about how it goes.

Message 7 of 7
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