HELOC prime minus margin rate ?

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rakamaka
Posts: 136
Joined: Tue Feb 28, 2012 2:32 pm

HELOC prime minus margin rate ?

Post by rakamaka » Tue May 19, 2020 5:13 pm

Shopping for HELOC rates. Some banks are offering prime plus or minus margin rates.
DCU and Third Federal are prime minus 0.25%. I understand prime rate is variable but what happens to margin? Once I get HELOC does margin of --0.25% remains same for duration of my loan?
I called CU and banks and asked this question but got parrot script answers that HELOC rate is variable. Nothing about margin itself is fixed or variable.
This is not about teaser margin rates.
Thanks

Silk McCue
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Re: HELOC prime minus margin rate ?

Post by Silk McCue » Tue May 19, 2020 5:35 pm

The margin is written into my ThirdFederal HELOC that I opened a year ago when it was -1.01%. My rate is currently 2.24%. I drew $50k on the line after the margin % had already changed.

I don’t believe they can change the terms on me but know that they could easily close lines/zero out the limit if they chose to.

Cheers

mogg
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Joined: Mon Aug 22, 2016 9:33 pm

Re: HELOC prime minus margin rate ?

Post by mogg » Tue May 19, 2020 9:46 pm

Margin's are fixed, and do not change for the life of the loan.

However, some banks may have an interest rate floor - if prime + margin is less than the floor, then the interest rate would be the floor. (e.g. 3.25 % - .25 < 4%, so the interest rate is 4%).

xerxes101
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Re: HELOC prime minus margin rate ?

Post by xerxes101 » Tue May 19, 2020 10:04 pm

Silk McCue wrote:
Tue May 19, 2020 5:35 pm
The margin is written into my ThirdFederal HELOC that I opened a year ago when it was -1.01%. My rate is currently 2.24%. I drew $50k on the line after the margin % had already changed.

I don’t believe they can change the terms on me but know that they could easily close lines/zero out the limit if they chose to.

Cheers
I have a Third Federal HELOC also with the same rate. I have been real happy with Third Federal by the way and I do recommend them. I am afraid to make any payments to pay the balance off because of the possibility you mentioned that they may zero out the limit. It happened to me during the last recession and it is real frustrating because I use / need it all the time...I believe chances are high unfortunately that the banks may do that again... :annoyed

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orthros
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Re: HELOC prime minus margin rate ?

Post by orthros » Wed May 20, 2020 6:43 am

Also have a 3rd Federal HELOC. Mine has a 2% interest rate floor with P-1.01%, so if Prime drops another 1/4% I'll hit that floor. Sucks but all the banks have wised up since the 2009 recession.

Silk McCue
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Re: HELOC prime minus margin rate ?

Post by Silk McCue » Wed May 20, 2020 6:50 am

xerxes101 wrote:
Tue May 19, 2020 10:04 pm
Silk McCue wrote:
Tue May 19, 2020 5:35 pm
The margin is written into my ThirdFederal HELOC that I opened a year ago when it was -1.01%. My rate is currently 2.24%. I drew $50k on the line after the margin % had already changed.

I don’t believe they can change the terms on me but know that they could easily close lines/zero out the limit if they chose to.

Cheers
I have a Third Federal HELOC also with the same rate. I have been real happy with Third Federal by the way and I do recommend them. I am afraid to make any payments to pay the balance off because of the possibility you mentioned that they may zero out the limit. It happened to me during the last recession and it is real frustrating because I use / need it all the time...I believe chances are high unfortunately that the banks may do that again... :annoyed
At 2.24% I'm not paying any more than the minimum payment at this time. I'm actually thinking about drawing down $50k and funding this Savings account offer from Capital One. Easy, no risk money. $500 bonus.
https://www.capitalone.com/score500

Cheers

Topic Author
rakamaka
Posts: 136
Joined: Tue Feb 28, 2012 2:32 pm

Re: HELOC prime minus margin rate ?

Post by rakamaka » Thu May 21, 2020 7:50 am

Most banks have floor of 3% and ceiling of 18% on HELOC rates. Given a choice it looks better to go with bank offering full 1% below prime rate. In future if prime rate increases why pay more interest for same loan with bank charging prime plus?
In past TF offered prime --1%. Can anyone suggest if other banks or CUs in the past offered such --1% rate below prime?

Silk McCue
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Re: HELOC prime minus margin rate ?

Post by Silk McCue » Thu May 21, 2020 8:41 am

rakamaka wrote:
Thu May 21, 2020 7:50 am
Most banks have floor of 3% and ceiling of 18% on HELOC rates. Given a choice it looks better to go with bank offering full 1% below prime rate. In future if prime rate increases why pay more interest for same loan with bank charging prime plus?
In past TF offered prime --1%. Can anyone suggest if other banks or CUs in the past offered such --1% rate below prime?
Don't know of anyone consistently offering 1% below prime in recent history ThirdFederal had been the consistent leader for quite some time with -1.01% on HELOC threads here. Others may have examples though.

It looks like Third Federal raised their floor to 2.75% from 2% (which my loan has) when they changed the Margin from -1.01% to -.26%.
Floor: The floor is a minimum rate for which the interest rate can adjust down. Third Federal’s current rate floor is 2.75%.
Cheers

snowman
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Re: HELOC prime minus margin rate ?

Post by snowman » Thu May 21, 2020 8:53 am

What happens when the rate resets, either up or down, while you are drawing on HELOC and making minimum (interest-only) payments? Do the payments change with the rate change, or are they locked into the rate when the line was originally drawn?

AlohaJoe
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Re: HELOC prime minus margin rate ?

Post by AlohaJoe » Thu May 21, 2020 8:55 am

snowman wrote:
Thu May 21, 2020 8:53 am
What happens when the rate resets, either up or down, while you are drawing on HELOC and making minimum (interest-only) payments? Do the payments change with the rate change, or are they locked into the rate when the line was originally drawn?
Yes they change with the rate. If rates went down, wouldn't you want the minimum payment to go down?

snowman
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Re: HELOC prime minus margin rate ?

Post by snowman » Thu May 21, 2020 9:02 am

AlohaJoe wrote:
Thu May 21, 2020 8:55 am
snowman wrote:
Thu May 21, 2020 8:53 am
What happens when the rate resets, either up or down, while you are drawing on HELOC and making minimum (interest-only) payments? Do the payments change with the rate change, or are they locked into the rate when the line was originally drawn?
Yes they change with the rate. If rates went down, wouldn't you want the minimum payment to go down?
Yes I would! That's why I asked, wasn't sure what the mechanism is.

Oregano
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Re: HELOC prime minus margin rate ?

Post by Oregano » Fri May 22, 2020 2:25 pm

snowman wrote:
Thu May 21, 2020 8:53 am
What happens when the rate resets, either up or down, while you are drawing on HELOC and making minimum (interest-only) payments? Do the payments change with the rate change, or are they locked into the rate when the line was originally drawn?
Every monthly payment will be based on the outstanding balance, amortizing the current interest rate over the remaining life of the loan.

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