Local Bank HELOC at 3.99% 10y. Better offers?

Question

I am interested to move forward with a HELOC offer from my local Bank here. They offer at 5.25% interest rate, up to 80% to 90% financed for 10 years, 120 months. During their introductory time to the end of October 2018 they offer to be able to borrow 3 times at a special rate of only 3.99% with their EQUITYLOCK product. No closing, origination or 3rd party fees.

So I see it as follows. Most other banks I contacted, they offer Prime plus, which is at least 5% plus some 0.5% or more, which is similar to what they offer at 5.25%, but with their special offer at 3.99%, it seems very low. Downside seems the 3 times borrowing only during the introductory time till October.

If you would want to borrow $5000 to redo your flooring and lock that in at the 3.99%, it is rather a waste and does not take advantage of the deal. I intend to borrow some $40,000 for multiple cash investments. That makes this very attractive as I can do that 3 times by October for a total of $120.000 each, which should total my possible equity borrowed. It is also a closed end repayment structure, therefore it does not go up with the interest rates. So it is like financing a $40.000 each for me for 10 years at 3.99%, seems like a solid deal for an investment property “mortgage”, which usually would run a lot higher besides that no bank finances a deal that low anyways.

Does that offer sound good to you and are there any known better deals out there?

Any info or input would be welcome.

Thanks.

Rijm D. · Answer

Just talked to the bank now. Updated info is excellent credit on primary residence is up to 85% LTV. First you qualify for their regular HELOC at 20 years and Prime plus 0.25%, so essentially 5.25%. Then you can borrow up to 3 times, now extended to November 30th 2018, with their EquityLock Structure at 3.99% for 10 years. Now that you did that, you changed your loan and that means you do not have the money available on a revolving line anymore when you paid back some of it. So in my case if all pans out, $120.000 borrowed, would cost me $1230 a month in P+I. So over 120 months at 3.99% I would pay  $147.600, or $27.600 in interest.

I could pay it off earlier and save myself some interest in an amortized loan, meaning more interest paid upfront, but that does not mean that the say $20.000 I paid down is available to borrow against again. Would need to reapply for another loan at that time with whatever new equity I hope to have then by market going up and money paid down and new LTV applied again.

Either way, this product seems to work for my purposes, and I could not do anything with my home equity right now and just talk big and brag about it, or I can put this money to work for myself and invest it in a performing asset some 3 properties in the Midwest, and have them paid off with this loan in 10 years by the tenant and then own 3 properties free and clear. 3 x $420 Net Income = $1260, which is a wash towards the Equity loan.

That is how I see it. Any input on that logic?

Rijm D. · Answer

EquityLock Structure: Credit Approval, Closed end, fully amortizing, fixed 3.99% APR up to 10 years. Minimum loan amount $5000. Borrow request only during Promo period ends Oct 2018. Max of 3 EquityLock Structured repayment options are allowed at one time. A $120.000 borrowed in my case would be $1235 per month for 10 years, 120 months total at 3.99%. If prepaid, it goes back into the equity I can borrow against again.

Thanks for feedback.