HELOC if I already have a HEL?

Question

I've tried to google this with little success. I have a mortgage and a home equity loan on my primary residence. For argument's sake, let's say I have a 220K mortgage and a 25K home equity loan (mtg at 3.75% for 24 more years, HEL at 1.99% for 6 more years). When I got the home equity loan, the house was appraised around 390K. Would I be able to get a HELOC?

I'm doing a lot of reading - books, forum posts, watching videos - but I still keep running into more and more questions. I guess that's the point of learning!

JR D. · Answer

@Larry T. Ok, thanks for validating that! I'll see if I can talk to someone at that bank about the possibilities.

Larry Turowski · Answer

I completely glossed over your rates.  Yeah, those are keepers.  You'll just need to go speak to a loan officer at a bank, preferably the one that you got your HEL from.

JR D. · Answer

@Larry T. So I'd be trading in my fixed 3.75% 30 yr mortgage and my fixed 1.99% 6 year loan for a (checks bankrate) 6.7ish% variable HELOC? Does that seem crazy?

Larry Turowski · Answer

@JR D. Yes, but listen.  You have $245K in liabilities on the house, and $145K in equity.  Most banks will require that you do not go above 80% of the value of your house for combined liabilities.  80% of $390K is $312K.  So you could get a HELOC of $67K on top of your current liabilities if the bank is the is the one who already gave you your HEL or is willing to take a third position lien.

BUT, what would be better is to get a $312K HELOC, and as part of the closing pay off your $245K mortgage and $25K HEL.  Then all you'll have is the HELOC.  Your interest will likely be a bit higher, but you won't pay interest while you are not using the money and it will be a lot more convenient and would also get around the issue of a bank maybe not wanting to take a third position lien.  There would only be the one liability with a first position lien.