Payoff a HELOC and First Mortgage
with a Jumbo Loan
There was once a time where interest rates on Jumbo Loans were typically 1/4% to 1/2% higher than "conforming" loan amounts.
Jumbo Loans are:
- Loans with a beginning Principal Balance of $417,000 or greater (in most areas)
- Loans with a beginning Principal Balance of $625,500 and above (in 46 U.S. Counties considered "high-cost areas)
- Loans with a beginning Principal Balance of less than $417,001.
During that time, it was very common for a higher-end homeowner to borrow the maximum Conforming Loan amount ($417,000 or $625,000), and then subsidize the needed funds to buy or Refinance with a Home Equity Line of Credit ... commonly known as a HELOC. Borrowing costs (and monthly payments) were reduced by doing so, sometimes significantly.
Many of those HELOCS are now coming due, expiring, ballooning, etc., as many were made during the real estate boom years, considered to be between 2004 to 2008. A majority of those HELOCS had 10 year terms.
If you have a HELOC coming due: And you're a higher-end Borrower, what options do you have to consider?
As with all mortgages, remember: Your options are dependent on your personal financial scenario ...
But recent clients of mine provide the perfect example of how refinancing a First Mortgage and HELOC into one single mortgage could save you money ...
This couple had a higher-rate First Mortgage and an Interest-only HELOC. I combined/Refinanced their loans into a single 15-year Fixed-Rate Mortgage.
This new 15-year Fixed-Rate Mortgage included a principal reduction. It accomplished 3 huge positives for this couple:
- It reduced their current term by 8 years of payments
- It fixed-in their HELOC amount (which was over $300,000) and allowed them to pay-off their ballooning term before it expired in 3 years
- It required a pay-down of the portion of the HELOC that had seen no reduction during the previous years they held the loan. (The Borrowers had opted to pay the "interest-only" amount each month.)
Monthly Payments: While the resulting total Monthly Payment was higher in this particular case, the Borrowers improved their financial situation by securing a Fixed-Rate, Principal-Reduction loan.Loan Terms: These clients also eliminated 8 years of payments and avoided the renewal/payoff of a substantial 2nd Mortgage in the future in the form of a HELOC.
The importance of Equity: Equity remains a key portion of the equation for any Refinance or Purchase Transaction.
If your equity position allows, and if you have a HELOC coming due, a JUMBO Loan may be the best option for you at this time ... whether doing a Refinance or a Purchase of a high-end, exclusive residence.
To find out what options fulfill your needs best, contact me. We can assess your HELOC coming due ... your current mortgage financing ... and take action to put you into a better financial position ...
Contact me for a full, thorough assessment of the financial options available to you.
I can be easily reached at:
I can be easily reached at:
Gene Mundt, Mortgage Lender, a Lender with 37 years of mortgage experience, will offer you exemplary mortgage service and advice when seeking: Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago and the greater Chicagoland region, including:
The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena, Manhattan, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook, Romeoville, Naperville, etc.), DuPage County, the City of Chicago, Cook County, and elsewhere within IL.
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