Frequently asked questions about this HELOC

HELOC FAQ | Russ Cox

Frequently asked questions about this HELOC

Home Equity Line of Credit

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This HELOC is currently available. It requires a full-draw of the credit limit at account opening into a Simple Loan with a fixed-rate term of 10, 15, 20, or 30 years. The 30-year term is only available for lines over $25,000. As that initial draw is paid down, the line becomes available for subsequent cash outs, card purchases and balance transfers.

It is a true revolving line of credit secured by the home. The mandatory initial full-draw funds a fixed-rate Simple Loan; once that balance is reduced, the borrower can redraw against the line via cash outs, card purchases or balance transfers.

Common uses include home improvement, debt consolidation, and cash-out. The line opens with a full initial draw into a fixed-rate Simple Loan. As that balance is paid down, you can redraw for cash-outs, card purchases, or balance transfers during the 5-year draw period.

These are the two payback options under a single account:

Revolving Plan (used for card purchases): Floating-rate plan with a minimum payment of 1% of principal per month plus interest. The rate is a floating index (WSJ Prime) plus a fixed margin set at origination.

Simple Loan (used for cash outs and balance transfers): Fixed-rate, fully amortizing simple-interest loan with payment terms of 10, 15, 20, or 30 years. The 30-year term is only available for lines over $25,000. The rate is determined at the time of draw.

Terms of 10, 15, 20, and 30 years are available. The 20-year term has been added and the 5-year term has been retired. The 30-year term is available only for credit limits greater than $25,000.

Yes. This HELOC requires a 100% draw of the credit limit at origination. That full initial draw funds a fixed-rate Simple Loan. There is no interest-only period on the Simple Loan.

The draw period is 5 years. Unlimited additional draws are allowed within that draw period. Once the initial Simple Loan balance is paid down, available credit can be used for cash outs, card purchases, and balance transfers.

Rates for additional draws are set at the time of draw. Cash outs and balance transfers use fixed rates on a Simple Loan. Credit card purchases use variable rates on the Revolving Plan, based on the WSJ Prime index plus a fixed margin set at origination.

Credit scoring depends on line size:

Line size of $400,000 or less: Experian FICO v9 and Experian Vantage v4. When there are co-borrowers, both borrowers must exceed 620 FICO and Vantage score.

Line size greater than $400,000: median of Experian, Equifax, and TransUnion FICO. When there are co-borrowers, both borrowers must exceed 760 tri-bureau FICO.

An automated home valuation is used in place of a full appraisal for line sizes of $400,000 or less. A full appraisal is required for line sizes greater than $400,000.