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Author: Dodgeball Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308644  
Subject: HELOC Question Date: 7/20/2006 11:20 PM
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Greetings Fellow Fools,

My wife and I are attempting to refinance our Home Equity Line of Credit. Since we have held our current HELOC for just over one year, according to our lender "if during the first 36 months of your loan you prepay your entire outstanding balance which results in a release of your mortgage or security interest in your co-op, you will pay an Early Closure Releae Fee equal to third party processing fees and any costs we incurred to open your account".

Our mortgage broker has told me that this is a common practice in the industry with regards to a HELOC. Has anyone else dealt with this issue? Thanks.

Dodgeball
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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 232447 of 308644
Subject: Re: HELOC Question Date: 7/20/2006 11:44 PM
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My wife and I are attempting to refinance our Home Equity Line of Credit. Since we have held our current HELOC for just over one year, according to our lender "if during the first 36 months of your loan you prepay your entire outstanding balance which results in a release of your mortgage or security interest in your co-op, you will pay an Early Closure Releae Fee equal to third party processing fees and any costs we incurred to open your account".

Our mortgage broker has told me that this is a common practice in the industry with regards to a HELOC. Has anyone else dealt with this issue? Thanks.


It is a fairly common clause on many mortgages, not just HELOCs. Some of them require you to pay 6 months or 1 years interest. Others, especially the no-cost refi's and HELOCs have clauses similar to yours that require payment of the costs if you don't hold the loan long enough for the bank to make up the costs.

However, it should have been clearly disclosed to you at the closing. Do you still have the closing papers that you can go back and look?

AJ

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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 232460 of 308644
Subject: Re: HELOC Question Date: 7/21/2006 10:53 AM
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As previously suggested, you should read your loan documents. For the fee to be collected, it must have been stated. If the loan has been sold, the acquiring institution is often careless (to their advantage) and try to enforce their current rules, but are required to abide by the orginal terms of the loans.

The only way to know their costs and processing fees is to ask. Afterwards, you can make the decision on whether or not to refinance now or in two years.

The way it is worded does not appear to restrict pre-payments to 20% a year. You still have the option of paying down the balance to reduce interest.

Debra

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Author: jeffbrig Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 232461 of 308644
Subject: Re: HELOC Question Date: 7/21/2006 11:15 AM
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Sounds like you can't pay it off without a penalty. How about paying it down to $100 or so, and letting that balance run for the duration of the 36 month period?

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 232463 of 308644
Subject: Re: HELOC Question Date: 7/21/2006 11:41 AM
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Sounds like you can't pay it off without a penalty. How about paying it down to $100 or so, and letting that balance run for the duration of the 36 month period?

Unfortunately, it sounded like the OP was trying to pay off this loan by replacing it with another loan: My wife and I are attempting to refinance our Home Equity Line of Credit.

If they were to leave this loan in place, the new loan would end up being a 3rd mortgage, with the possibility that the 2nd mortgage (current HELOC) could be re-drawn upon. This means that the 3rd mortgage would likely increase their interest rate substantially because they are taking on significant risk, being in 3rd position. In fact, in Texas, where after the purchase, you are not allowed to take loans out in excess of 80% of the property value, you may not even be able to put a 3rd on, depending on the equity.

AJ

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Author: alaskack Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 232477 of 308644
Subject: Re: HELOC Question Date: 7/21/2006 2:44 PM
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You might be able to get the fees waived if you refinance through the original lender. Never hurts to ask. If they do, make sure it is noted on the new contract.

Calvin

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