Home Equity Credit Line Prime

It means that you are signing up for a variable rate loan, and the actual rate you will pay is the prime rate less 0.76%. So if the prime rate is 5%, you will be charged 4.24% (5-0.76=4.24).

It is important to know which version of prime rate the loan is quoting. Right now, the WSJ prime is about 3.25%, so you would pay only about 2.5% on this loan. Sometimes when they write prime they mean LIBOR (london interbank rate) which is slightly different.

One thing to keep in mind is right now, prime rates are the lowest they have been in 40 years, due to the government's efforts to stimulate the economy. They are not going to stay this low forever. In fact, they are more commonly around 4%-5% historically.

So, if you are deciding to take a HELOC with this kind of variable rate, tread carefully and figure out the payment at both the current interest rate, and what it would be if the prime increased by 2%, 4%, and 6% before deciding if you can afford the payments.

A HELOC is usually a recourse loan, which means if you don't pay it, not only can they take your house, but if you lose your house to foreclosure, they can still come after your other assets for payment.

They are very useful tools for home improvements and other big spending, but make sure you know what you are getting into, and only do what you can afford to repay in a small (less than 5 years) amount at a time.

2009-09-18 18:18:01 by natona

Some Ways to Lower Your Home Equity Line of Credit Rates Owning a home must be the most precious property that someone can possess in most peoples ...

Prime refers to the prime rate, which Home Equity lines are based on. The current prime rate is 8.25%. If you see a "Prime Rate Home Equity Line", this simply means you are getting the equity line at the prime rate, with zero margin.

Most Home Equity lines carry a margin that is added to the prime rate. This sum is your interest rate. So if you have a margin of 2.000, and prime is 8.25, your interest rate is 10.25%.

Some banks even offer Prime minus 1% for the first few months of the loan term. This is called a teaser rate, as it's a low start rate that won't be around forever.

2006-09-25 10:29:42 by calvositony

I have a mortgage & home equity line of credit with the same lender. The rate on the equity loan is currently 2.5% (prime - 3/4). I was thinking of refinancing my mortgage and taking out a little cash to pay off some credit cards. My question is, if I refinance my mortgage do I have to pay off the balance on my home equity loan?

Yes, you will need to pay it off. You won't get a refinance with an existing lien against your house.

2009-08-12 18:25:40 by Anthony J

The bank is offering a line of credit sale. I pay no fees, the bank is covering all closing costs, state taxes, appraisal fees and the first year annual fee. I can take out a line of credit on the equity of my house. The rate is prime minus 1/2.

What is in it for them? Could there be a hidden downside for me? What do you think?

This sounds normal to me. They make their money on the interest and incidentally, you must have good credit becuase prime minus half is good. I don't think their costs incurred are all that much and half the time the appraiser doesn't even look inside the house. It's basically a good source of low cost credit for people with equity in their homes. (low risk for them.) I assume it's a reputable bank.

2007-10-20 13:30:09 by moviefan2020

A couple of years ago I tapped into the equity of my home to the tune of 30,000. Rates remain ok, as they are a couple of points above prime, but i feel as if I am sitting on a time bomb. I am not in the best position to refinanace the house because of the decreased value. How can I transfer that debt to something with a locked interest rate while i pay it down?

Have you ever thought of a personal loan? that would be locked in and you could just pay off the 30k. Its just might be an idea so don't jump into it. I would suggest to find a mortgage licensed person to help you out. And if I were you don't ask the bank cause most of the time there not there to help you!

2009-06-11 08:08:57 by huck75