Comments on: Home Equity Line Limits

By: brianm

brianm — Wed, 17 Feb 2010 23:21:07 +0000

Another good thought, but the client did not necessarily want "cash out" at this point. He was just looking to refinance the $600,000 he owed and wrap in some of the closing costs. The client liked the idea of keeping the equity line as large as possible. So refinancing the 600k 1st trust, and taking the haircut on the equity line was the best bet for the client. He would have preferred keeping the equity line at $245,000, but cutting it back to $190,000 was acceptable to him, and we still got him a much lower rate on the 1st trust, which was the main objective in the first place.

By: brianm

brianm — Wed, 17 Feb 2010 23:16:49 +0000

Thanks for the comment. A $793,000 refinance would have been over the "Conforming-Jumbo" loan limit of $729,250. This would have forced the loan into "Jumbo loan" territory, where the rate would have been much higher. So we could not have raised the loan to $793,000. Also, the client really wanted to keep his loan structured as it was, and did not want it altered. but thanks for thinking outside the box. One always needs to look at all the angles.

By: John

John — Wed, 17 Feb 2010 22:27:38 +0000

OTOH — I think they should have considered a refi amount of the $653K owed on the 2 loans. I also assume your client would then have been eligible for a $140K equity line with an initial $0 balance. Would that have been a better financial option for them?

By: John

John — Wed, 17 Feb 2010 22:19:34 +0000

Thanks for posting this great information. I'm wondering if there would have been any advantage to roll the $50K owed on the equity line into the refi. Would the cost/benefit for the $793K refi (including a cash out cost I assume) not have made economic sense in your clients case?

By: Mike in LA

Mike in LA — Tue, 09 Feb 2010 05:44:44 +0000

wow those are some pretty stark numbers. I remember when I bought my house 3 yrs ago I splashed out more than the required 10% down payment. I thought, so what I can always borrow it back later. Hindsight is 20/20 , but now I think that was unwise.