How to choose a lender for HELOC?

Question

When applying for a HELOC, what factors should determine which lender to choose?  Considering going with a local bank w/ an average rate for convenience but wanted to gain more insight.  Thank you.

Chris Winslow · Answer

It would be good to be comfortable with the lender and make sure they seem legit, local banks are great and can even be preferred but it just depends what all you are looking for, establishing a relationship with a local bank may also help with funding later down the line. I was recently asking around about a HELOC and asked questions about: max LTV that they offer, max credit line available, interest rates, payment terms (interest only vs principal + interest and timeline of credit line for draw and payback period), annual fees, how they will value the property, closing costs, early termination fees (should not really be an issue either way), and do they offer on only primary or something similar on investment property as well. Good Luck!

Andy Lee · Answer

@Paul Crosby II appreciate the info as well.  You mentioned HELOCs on investment properties.  I have heard some banks do this but I have yet to come across one that does.  Any recommendations on a lender?

Paul Crosby II · Answer

@Chris Winslow pretty much nailed it all on the head. It really also depends on what property type you are using the HELOC on.For instance, credit unions will get quite aggressive on your primary residence and give you 85%-100% of the appraised value (appraised value can be physical or desktop appraisal). They are also much better with not prematurely calling/closing your HELOC before the initial draw period

Conversely, there are institutions that will do HELOCs on your investment properties which might have higher margins( The interest charged above Wall St Prime Rate) and more restrictive terms.

Definitely a great time to be looking at HELOCS so you can tap equity without affecting a fixed low rate mortgage.

Andy Lee · Answer

Very much appreciated Chris.  Thank you!