I have a HELOC on my primary mortgage. Just refinanced it to another bank. The bank I have my original HELOC from sent me a payoff letter that says unless I request it in writing my line is still able to withdraw until 2023 (paraphrased). That line was for 25k. I refinanced it to another bank with 25k line because they have a lower introductory rate.
so...what if I refinance to another bank next year who offers an introductory rate and bank number 2 does the same as the first one by leaving it open where I can draw from it. then, ill have an available 50k to pay cash for a rental at prime rate versus paying higher interest with a 30 yr fixed. the payment would be interest only on both lines but id pay more than just the interest.
50 k plus 10-15 I would throw in anyway for a down payment is plenty for my niche. no closing costs. no appraisals. cash in hand.
anyone done this or do any of you see anything I am missing?
From having worked at a bank, this is an oversight that will eventually be rectified. Once the bank realizes that they no longer have a lien position on the property, they will close the HELOC.
If you were to borrow money from it, once they realize their error they would ask that you pay it in full immediately. They would also probably be very quick to hit your credit bureau (since they lost recourse rights) as measure to give you incentive to pay it quickly.
This isn't a scenario that is supposed to happen.... but never-the-less still occurs. Generally speaking, the bank you refinanced with probably did a poor job at sending them the payoff. They are supposed to have you sign stating your intent to close it.
Also, while HELOCs are very useful from a flexibility standpoint (and lowering your monthly obligation when necessary), they are not good long term solutions as they are always a variable rate. If it is a property you intend to hold, you want to lock it in at a 30yr rate. The Fed was already talking about raising rates again next month, so MTG rates have already started moving upwards (and have been for some time).
ok. thanks. ill tread carefully.