Is a "no appraisal" Line of Credit possible?

Question

We're cancelling a line of credit on a property with no mortgage, because the required flood insurance is crazy expensive and won't help us anyway. Thieving bank want $100 just to end a $0 balance loan! This line is more of insurance than an active source, at least for now. I have another property that isn't in the flood zone, with $185k outstanding, and last year the city reassessed it for $650k.

Seems to me a bank would be safe with a $200k credit line on that property without my paying $600 for an appraisal. The local bank holding the above cancelled line and the mortgage on the other said they can't do that by law. But that seems stupid, it should be about LTV. They should be able to set a "no appraisal" floor on the value, like $500k, and work from there. But I've often found my "common sense" doesn't translate to the real world. Does anyone have relevant info on this process?

Chris Higgins · Answer

@Johann Jells

I have never had to pay for an appraisal to obtain any of my Helocs (closed on the last one just a few weeks ago) . In most cases, banks usually have the option to either use an electronic appraised value or have the applicant pay $400-$500 for a full appraisal. Recently, I applied for a $75,000 heloc based on what I thought the current max of 80% LTV would be. Bank told me I needed a full appraisal for that amount and it will cost me $500. Called them up and long story short their electronic appraisal value was like $500 below what I thought my property was worth. So I just adjusted my Heloc application amount down to $74,900 and suddenly I no longer needed to pay $500 for a full appraisal. Not why I had to call and interrogate them before I got that option though.. 🤔

Ned Carey · Answer

@Johann Jells no it is not crazy. I am sure it is because regulations require appraisals so we don't have another financial collapse. That said I bet there is a way around that. But why are you worried about $600 on a $200,000 line of credit.

Lucas Milburn · Answer

@Johann Jells

With a new line of credit some lenders will waive the fees if you keep the account open for 2 years. Also depending on type and location some lenders will use a comp if fairly close and recently sold as opposed to doing an appraisal. Most probably want the appraisal but I have a property that is a condo and they were able to see what another identical unit sold for and used that. As for $100 to close a line of credit you could pose that since they are changing their policy and requiring you to add flood insurance that this changes the agreement you had and try to get out if not but in the end it’s only $100 may not be worth the aggravation. Might be good to stall and secure your other line of credit first to make sure that goes through before closing this one.

Nathan Gesner · Answer

Why pay $100 to close the line of credit? It doesn't cost you anything to use it so just leave it sitting until it terminates naturally.

Is a "no appraisal" Line of Credit possible?

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