Been having some trouble trying to figure out our options so hoping the community can help. We have a 7 year fixed interest only loan that becomes amortized and variable based on prime + 1 for the remaining 23 years. Our house cost 250k and the loan was for 200k at 3.2%. We’ve since paid of 40k of the principle, our home has appreciated to 300k on Zillow, and we’ve spent 40k finishing our basement further increasing the value of our home.
I would like to get a heloc to access the extra value of our house, but our bank says they and most banks won’t put a heloc on top of an interest only loan because it’s against there policy. They said the only option is to do a complete refi and get a new loan, which I don’t want to do because interest rates have increased since.
Is there a different type of heloc/mortgage product that I can look into for a case like this?
It may not help, but have you asked another mortgage lender? It doesn’t have to be a bank.
How far into the 7 years are you? Do you intend to sell before 7 years are up? Because interest rates are likely to keep increasing, so you should consider refinancing now. Just make sure to do some comparison shopping (Compare Today's Current Mortgage Rates | Zillow) and not go with whatever your bank tells you.
Since you asked a question about your personal situation and not something more general, it is often fair game on this forum to probe for more personal details to better understand your situation. You are not in any obligation to answer, so if you choose not to, feel free to ignore my question and look for someone to post a specific answer.
From what you’ve posted, you don’t have a super expensive house, you have an interest only loan (low payment), you’ve paid off a chunk of the loan, and you’ve spent a bunch on a remodel. How much money do you need and why do you need it? How far into your 30 year loan are you? Have you run the numbers to make sure that a HELOC would actually save you money over a complete refi?
Not in my experience. The FED rate changes only influence short-term rates, they do not directly or immediately influence the long-term rates like 20 or 30-year mortgages. Over the past 2-3 years, mortgage rates increases followed FED rate increases usually after a brief delay.
The yield curve inverts, which spooks people into thinking it’s a precursor of recession, and they flee equities and seek the safety of bonds, causing the stock markets to crash and bond prices to spike.
I can confirm that IME, many banks will not knowingly put a second HELOC behind a first HELOC.
The reason is that the risk profile of a HELOC typically assumes that it is either in first position, or the first position loan is being paid down like a typical mortgage. As it is paid down, the risk assumed by the HELOC issuer is reduced.