Home Equity Lines and FICO - Posted by Eric (NH)

Posted by Eric (NH) on May 21, 2001 at 18:43:44:


I checked the paperwork for my current HOL with the same bank, and there are no prepayment penalties or payback costs for closing the account. But I thank you and the others who e-mailed me privately with the same concern.

Eric (NH)

Home Equity Lines and FICO - Posted by Eric (NH)

Posted by Eric (NH) on May 19, 2001 at 24:19:45:

I am a landlord actively looking for another rental property. Given the unwillingness of many sellers to carryback second mortgages, I may consider using my home equity line for extra up-front cash, especially given the plummeting Prime interest rate.

At the moment, I have an untapped HOL of 47K fixed at Prime, but given my home’s current equity I could probably qualify at this time for close to 100K with a new application. This bank (Citizens) has a program whereby new applicants who draw 50K or more at closing receive a rate of Prime - .5% for the duration of the ten year draw period, even if the initial 50K is paid back immediately.

My question is whether this quick activity with the 50K might screw up my credit in the next few months for a bank loan on a new property or for a refi on my existing property. I currently have a FICO of 810, and would hate to damage this score, although getting an HOL for 100K at Prime - .5% seems too good to pass up.

Educated advice would be greatly appreciated.

Eric (NH)

Re: Home Equity Lines and FICO - Posted by Bruce Lawson

Posted by Bruce Lawson on May 20, 2001 at 07:36:10:

Hi Eric,

I have noticed that inquiries will only bring your credit score down 5 or 10 points per item, since your score is over 800 you would need many inquiries to bring it to a point where your rates will change.


Bruce lawson

Re: Home Equity Lines and FICO - Posted by Les Gee

Posted by Les Gee on May 19, 2001 at 24:50:40:

Having a fico of 810, you have a long way to go before it is damaged. 720 and below is where i see the first drop increase in fees for jumbo loans.

Getting a new loan WILL lower your Fico, but not by much. Anytime you apply for a loan, anyone looks into your credit it drops…but again not by much.

I think a more important issue is how much will you be using, so you can calculate the interest saving. i.e. if you don’t use it, it doesn’t matter interest wise what you get. However, the cost to get it and compare it to the annual fees, early closure fees, etc, becomes more important.

Re: Home Equity Lines and FICO - Posted by Eric (NH)

Posted by Eric (NH) on May 19, 2001 at 08:39:28:


Thanks for the info. The HOL application is fee-free, as Citizens pays all expenses, such as appraisal, recording fee, etc. The new, higher HOL would cost me nothing, except for maybe thirty dollars in interest at the outset if I borrowed the 50K for a few days. The only other cost on the HOL has been a fifty dollar annual fee, which I have felt is well worth the money for the option of maintaining easy access to my equity.

Eric (NH)

Re: Home Equity Lines and FICO - Posted by Mike angarola

Posted by Mike angarola on May 21, 2001 at 14:28:00:

Eric - You may want to check with the lender in terms of any penalities you may incur if you close the line early. Many banks are looking for a 3 to 4 year committment, even if you keep a zero balance. The penality is usually some of those closing cost that they covered when you took the line out.