When Not to Draw on Your Home Equity Line of Credit
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When Not to Draw on Your Home Equity Line of Credit
Author:Ari Socolow
on March 12, 2018
- modified on December 18, 2018
For many years, we have written about appropriate and inappropriate reasons to have a home equity line of credit. In particular, home equity lines of credit can be used to consolidate more expensive debt (credit card, education loans, etc.) and can be used by consumers to even out irregular cash flow. We’ve even cited cases where the affluent can use home equity lines to their advantage.
Drawing on your home equity line jeopardizes your home if you cannot service the loan and repay the principal. Therefore it is not without risk.
From the news this week, we have an example of a case where one really shouldn’t be drawing on their home equity line. To be clear, nobody should be drawing on their home equity line in order to pay hush money to an adult film actress just before a Presidential Election to enable the Russians to complete their goal of electing a pawn as the U.S. President. Michael Cohen has set a precedent that we do not recommend you follow.
Ari Socolow: Ari Socolow is the Chief Economist and Editor-in-Chief at BestCashCow. He is particularly interested in issues relating to financial literacy and bank transparency. Since co-founding this website in 2005, Ari has been frequently cited in the media as an expert on local and national savings accounts, CD products, mortgage and loan products and credit card rewards products.
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Our APRs start at 4.99% for the most qualified applicants and are higher for other applicants. For example, for a borrower with a CLTV of 45% and a credit score of 800, a five-year Figure Home Equity Line with an initial draw amount of $50,000 would have a fixed annual percentage rate (APR) of 4.99% and a 3.00% origination fee. Your total loan amount would be $51,500. Origination fees range from 0-4.99% of your initial draw depending on your credit score and the state in which your property is located. The advertised rate is available only to borrowers using primary residences as collateral. Your actual rate will depend on many factors such as your credit, combined loan to value ratio, loan term and occupancy status. The advertised APR includes an autopay discount of 0.75%. APRs start at 5.74% for customers that do not opt in to autopay.
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APR is variable and based on the Prime Rate (Prime) published in the Wall Street Journal (4.75% as of 12/1/2019) minus 0.50% adjusted each billing cycle. To receive the lowest rate, Eastern Bank requires a minimum draw of $25,000 and establishing automatic payments from an Eastern Bank Personal Checking Account. Minimum APR is 3.99%. Maximum APR is 18%. Minimum line amount is $10,000 and maximum line amount is $2,500,000. Subject to credit application and approval. Rates are subject to change.
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Comments
Ingaz
July 25, 2018
Is it necessary to put YOUR OPINION OF POLITICAL ISSUES in the conversation about banking? What's wrong with you, people? Don't you see how DISGUSTING you look and sound? Millions of hard-working Americans held a different view and they (me including) AREN'T INTERESTED IN YOUR BS! How shameful and sickening.
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