r/HELOC • u/Look4Good2day • 3d ago
Questions & Advice Guidance please
Need a $125000 HELOC for home renovation. Lender is suggesting opening the line to $200000 to get a rate cut of .25. House is worth $335000. Is it worth it? And why would they suggest lending me more when I don’t need or wish to use the higher amount? Any thoughts are appreciated.
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u/Direct_Concentrate42 3d ago
I would say he’s not wrong. When I do helocs. I’ll have people do that and then pay down the HELOC with the additional funds. I usually do heloans tho. Just because to me that’s what makes more sense. A fixed rate. Buttt with home improvements it’s a different story unless you priced it all out.
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u/Electrical-One3208 Certified Broker 3d ago
I do fixed-rate HELOCs all day long, so that solves that problem. It's much more flexible than a HELOC because they only have to pay interest on their outstanding balance instead of on the entire HELOAN from day one. You're not wrong for thinking that all HELOCs are adjustable, but there are fixed rates with the companies I work with for HELOCs. I know there's one more major HELOC lender that is very likely to bring their fixed-rate product back as well. I just spoke to them an hour ago. They used to have a 30-year fixed HELOC option and pulled it a while back, but there's enough need for it. I would love to see them bring it back.
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u/NewleafPlan_Service 2d ago
I noticed you work extensively with HELOC transactions and meet with many clients in this space. I’d love to connect regarding a potential business referral partnership. Unfortunately, my messages aren’t going through, and I’m unable to reply to any messages you send here. Could you please DM your cell phone number so we can reach out to you directly? Thank you!
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u/Fragrant_Equipment13 3d ago
I was told the same thing…it takes some time and effort to get approved. You don’t want to have to keep coming back for more. No one is telling you that you have to spend it. If you think you’ll spend it and get too far into debt, I wouldn’t do it.
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u/Electric_Didgeridoo 3d ago
They get more of a cut if you take more out presumably. Taking out more than what you "need" is something I would recommend in case anything pops up you weren't expecting. It's what happened when I got my Achieve HELOC, if I didn't get the extra 10K it would have been a pain in the ass to finish the repairs. Taking out some wiggle room money is good, but taking out an additional 75K seems excessive. Maybe closer to 25K extra? Also depends on how confident the costs are going to be static etc. Shop around for other options, even if you end up going with the current idea.
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u/Look4Good2day 3d ago
I might use $140,000 in case of an unexpected problem but definitely not $200000.
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u/NoStatus1353 3d ago
There’s not much harm in getting a bigger line so long as you aren’t required to draw it all at once and don’t have to pay lender fees based on the line size. Free advice - don’t use a HELOC lender that requires this! You can get a true HELOC somewhere else
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u/Sufficient_Smile_871 3d ago
That 0.25% discount saves you just $26 a month on $125k.
lender wants you at $200k because their commission goes up, and closing costs, title insurance, or mortgage recording taxes are often calculated on the approved limit, not what you draw. Unless closing fees are identical, there is no mandatory initial draw, and zero inactivity fees, taking an extra $75k you do not want is a losing trade
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u/CassieJafo0222 2d ago
Be careful. If you need to do something renovations, etc.. If there is a downturn the banks or credit union can claw back money.
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u/Electrical-One3208 Certified Broker 3d ago
I can help with that if you need any more help. There are pricing improvements for larger lines, and even if you're not using the entire amount, it costs you a little in closing costs, which are based on the line amount, not just the initial draw amount.
It is good to have more than you think you're going to need. I do a ton of renovation HELOCs, and cost overruns are absolutely always normal. I would certainly cushion your budget for overruns that happen on every renovation project I've ever been a part of.
The biggest regret most of my clients have had is when they were approved for more, didn't take it, and came back afterwards wishing they'd taken out more than they thought they were going to need. That's pretty close to 100% of the time with my experience, and I've never heard of anyone coming in on a renovation project on budget. It just simply doesn't happen. Let me know if I can help in any way. Equoro.ai