Keep your home-equity line of credit from freezing Realty Q&A
Question: I have a shrunken home-equity line of credit with a big bank on the property in which I reside. What is the best strategy, if any, to minimize the possibility that the HELOC will be frozen or closed?
Currently, I have the line tapped to the max (minus breathing room for the minimum payment of interest only) with the funds in an interest-bearing account. While I’d prefer to pay it off, I would hate for the account to be shut down on me. As far as I can tell, my condo is right at the 80% loan-to-value mark now. If the market took another big hit, obviously the LTV would go higher and set off alarms. I am currently breaking even after tax on the interest in/interest out, but the terms are phenomenal versus terms on new lines of credit.
Answer: I checked with several major home-equity lenders, none of whom wanted to be quoted directly, but here’s what I found out off the record.
For starters, as long as you are current on your payments, lenders cannot demand that you pay down your balance, even if you are fully drawn. So you have nothing to worry about there.