Rental Property Investor · Hayward, CA · Member since 2019 · 34 posts · 6 votes
I want to refinance my primary residence for lower interest rate but I have HELOC on it. Currently it's all paid down. But in order to get the best refi rate I will have to close that heloc… due to subordination. My question is - Is there any way I can keep the line of credit and still get the best rate on first mortgage ?
I know few people whose rate increased substantially due to a heloc.
I am curious why one would refinance if there is already a heloc available, to reduce interest paid? If reducing interest is the goal wouldn’t it make sense to follow the follow steps?
1) Paydown the principal of existing loan using heloc.
2)Recast the current loan ( instead of refinancing) to lower monthly payments
3) Start using heloc as q checking checking , since the rates are almost zero in a traditional checking account.
This is just one cost effective way of reducing interest costs I can think of and it costs almost nothing
I know few people whose rate increased substantially due to a heloc.
I am curious why one would refinance if there is already a heloc available, to reduce interest paid? If reducing interest is the goal wouldn’t it make sense to follow the follow steps?
1) Paydown the principal of existing loan using heloc.
2)Recast the current loan ( instead of refinancing) to lower monthly payments
3) Start using heloc as q checking checking , since the rates are almost zero in a traditional checking account.
This is just one cost effective way of reducing interest costs I can think of and it costs almost nothing
You need to request if the heloc will subordindate its position "back to" a second lien position. the liens go basically in date order. Since the hloc lien is older, it will slip into 1st position. A mortgage by definition is a 1st lien position which give the best interest rate. So, the service/holder of the hloc lien has to agree to give up that pending 1st position...
Investor · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
5y
@Sayli Mulay I just closed on a first-position refi and paid an extra $400 (or maybe $500) for the subordination paperwork. An annoying fee, but not that much in the grand scheme. If they are adding percentage points, you may want try and negotiate or look at different banks.
Alternately, close the HELOC and open a new one after closing on the refi. HELOC application fees are usually only $50-10.
Lender · Nationwide Lender · Member since 2019 · 391 posts · 140 votes
5y
@Sayli Mulay
I have been doing several of these lately. You have to close the Heloc if you would like it to be considered a rate/term refi. It best to close it and reopen another one after. I have options on HELOCS up to 95%LTV and im able to send the docs from the refi to the Heloc lender. Saves time. You can subordinate it as well to keep the current heloc. What state are you in?
Rental Property Investor · Hayward, CA · Member since 2019 · 34 posts · 6 votes
5y
@Mike McCarthy Does the closing gets delayed due to Subordination process? Because 60 day rate lock would be higher than 30 day lock.
I didn’t want to close heloc because There is early pay off penalty and to reopen new heloc there will be appraisal cost. So paying 400 for subordination paperwork would make more sense. Thanks
Investor · Grand Rapids, MI · Member since 2020 · 2 posts · 0 votes
5y
@Sayli Mulay Yes, you are able keep your HELOC open when refinancing. If you are going from one lender to another you will have to complete subordination paperwork and likely pay a fee. I recently was in the same scenario as I refinanced our primary residence from our local credit union to Comerica Bank.
Bellville, OH · Member since 2019 · 2 posts · 1 vote
5y
Will your lender allow a loan modification instead of a refinance? I have a HELOC and did a loan mod this summer with no issues. Received a lower interest rate and the modification fee is a fraction of the cost of closing on a refinance.
Investor · Grand Rapids, MI · Member since 2020 · 2 posts · 0 votes
5y
Took 50 days to close. At the time, there was no difference in the rate with or without the HELOC (which was paid down to $0). I wanted to keep the HELOC open because we wanted flexibility as we were looking at another property.
We are in Sunnyvale, CA and have a heloc. We refinanced our primary loan and rate was higher because of heloc. We had a choice to consolidate geloc and primary but here are some disadvantages and due to which we left it
1. Heloc processing is now more complicated and it may impact your borrowing limit if you close and borrow. I wanted to have some cash on hand in case our jobs are impacted. My kids are in college and high school so as safety needed the funds and did not want to
lose that
2. The interest rate of heloc is 1.5-2 (fluctuates every month automatically) , if i consolidated it then my interest rate would be higher 2.5-2.8 for entire amount so left my heloc as is.
Lender · Nationwide Lender · Member since 2019 · 391 posts · 140 votes
5y
@Sydney Sherman
I would have to research California a little more to find a 95% LTV, but I did connect my last refi there a couple weeks ago with a 90% in California. I will PM you.