Help! Should I cancel my HELOC?

Question

I signed all the closing paperwork for my HELOC on Monday, July 11, so today is the last day of my three business days to cancel.  I was reviewing the documents again this morning and noticed that the interest rate in the closing package is 0.75 percentage points higher than what was on my Lock-In Agreement from June 10.  Bad on me for not catching it during the closing - it was at my house with a mobile notary and the whole thing was very rushed.  Lesson learned.  I plan to call today as soon as the bank opens to see if they can explain what happened.

What would you do?  This is on a $100k line.  The lock-in rate was 6.7% (I realize that's still not great) vs 7.45% in the closing paperwork.  Are there any other ramifications (other than a lot of wasted time and potentially losing the appraisal fee, title search fee, etc.) that I should be thinking about?  I did pay the closing costs up front, which I now regret also.  I realize that in the big picture, the difference in rates isn't going to make a huge difference, but it has me questioning the lender.  Maybe I'm just misunderstanding how the Lock-In Agreement works, but it seems pretty straight-forward (Florida Statute, Chapter 494, Section 0069, for reference).

I really appreciate any input.

Mark Fein · Answer

There was a .75% increase to the Prime rate around June 15th.   HELOC rates are usually tied to prime.

Mark Fein · Answer

Your terms are X plus prime.   You locked in the X on the lock in agreement.  I hate to be the bearer of bad news but another increase to prime later this month is almost certian.

Deb S. · Answer

@Steven Wachtel I also live in Florida and have a HELOC that I took out last year.  Every time the fed raises rates, your HELOC rate will go up by whatever that was - last was .75.  That's how it works.  It is not a fixed rate unfortunately.  I started out last year at 5% and I am now at 6.99%.  Still relatively cheap money compared to your credit card rate (which typically also goes up when the fed raises rates) or interest rates back in the 80s.

Remember you're only paying interest on the amount that you use.  Do you plan to pull out the whole $100k? Hope this helps.

Deb

Kerry Baird · Answer

@Steven Wachtel, if you have a lock period, the rate should match your lock.  Some of the HELOCs I've seen do not adjust for the first year or three.  Call your rep and ask the question.  Or read through your documents and ensure the product matches what you expected.

Steven Wachtel · Answer

@Deb S. @Mark Fein

Thank you both!  That makes me feel a little better.

I understand that the rate is tied to the prime, I just thought I was "locked in" at the lower rate, at least initially, based on the "lock-in agreement.". Go figure.  Which begs the question: What's the point of the lock-in agreement?

Deb, no, I'm not planning to draw from it in the immediate future, just wanted to have it available if I need to supplement my cash savings for a down payment.

Help! Should I cancel my HELOC?

Most Popular Reply