da noive a some people!

[mascot]

When I financed my home, I set up an HELOC and planned on using that as my "savings account", figuring that any interest I earned in a real savings account wasn't going to cover the huge interest amount on my mortgage.  If I had an emergency, I'd use the equity line...that way I could put more money towards the principle.  The credit limit was set higher than I cared, but I had a small balance on it, so it didn't matter to me.

Last year, I got my tax refund and decided to pay $4000 towards the equity line, and about a month later I got a letter from them stating that due to the economy they were freezing everyone's equity line, meaning it's basically become a "closed" account for all intents and purposes.  I can understand that, but crap...I just sent them four grand and if I had been warned that would happen I would have put that money in savings instead.  It made my year kind of rough, but I survived.  Lesson learned, I guess.

So yesterday I get my mail and there's a letter from them (HELOC) stating that the economy is tough and I should consider refinancing both my mortgage and my HELOC with them, combining the two for a better rate and possible lower overall payment. 

Can you imagine how I felt?  My email response to them: 

You have GOT to be kidding me!  Last year you cut me off without warning when I wasn't even close to my limit, this year you want more of my business?  Six words for you: step away from the crack pipe!!!

[Joyce]

That IS pretty nervy...and to me seems borderline illegal.
It's your effing money and equity, how can they freeze it legally?

So what are you going to do?
Will you go for a lower overall payment?

[mascot]

**I should mention that my mortgage is with a different company (one I actually like!) and the HELOC was done afterwards.**

Since it's an equity line of credit and based on having equity (which very few people have these days) they froze it as a "safety net" for people who are in over their heads.  I can understand it, because too many people had equity and just had to have a new boat or a Harley...and now they can't afford the payments because they have a mortgage and a $40k equity loan.  I wouldn't have gotten over my head like that, I just used the money for home repairs/improvements or emergency, but for a year I was stuck without a savings balance...I spent every extra penny paying down my principle... $100-200/month.  Now  I have a bit in savings and won't be so quick to put it all towards my mortgage or my Equity line.  It sucks, but I would have to show them I have equity for them to unfreeze it, and that won't happen for a while.  I just wish I knew before I sent that check!! 

I'm watching the rates and since I'm at 5.25 it's pretty low already.  When it goes to 4.5 (which it just might - or lower!) I'm going to refinance and hopefully be done with it all.

[Mikey]

I hate dealing with finances and should be paying more attention.  Just last week I reviewed our home equity loan.  i I noticed that two years ago I was paying 8.5% APR.  Today I'm paying 4.25%.  I'm not certain why it has been cut by more than half but I'm glad to see more money going toward the principle....

[Sunbeam56]

Mikey - that means you have a variable rate mortgage keyed to the prime rate. The prime rate is what banks charge each other for loans. Right now its under 1%.
So your mortgage goes down as a percentage because the cost for the bank to get the money to re-loan to you has gone down.

If you can afford the points, they will get you for a couple of points. Now would be a good time to refinance with a FIXED rate mortgage. Because they are very low.

What happens is, if the economy stabilizes, the prime rate will go up, and so will the variable rates.

[Jerry]

Mike Sunbeam had good advice. Do it NOW!

[Julles]

When I was paying on my house, I always sent extra money, and specified that it was for the principle, not interest.  I made sure to write that on the payment voucher, my records, and on the back of the check.

When I was ready to pay off the house, it turned out they had applied all those checks to the interest!  Well, luckily I had proof that it was supposed to have been applied to principle, and I raised cain and got them to redirect the money.

Anyway, the lesson is, if you possibly can, send extra money and make sure it is applied to the principle.  You will be amazed at how quickly you can pay off a mortgage (or any loan) if you double up on payments, or at least send some extra money. 

It feels GREAT to not be making monthly payments.  (Not to mention that these days, with the economy being what it is and my business no doing well at all, I doubt I could even make the payments.)

[miguynmkoi]

Hey Mikey, I ditto what Sunbeam says.  Do it now, it won't go any lower with the freeze.

That really sucks Blind'Too!    I don't understand the finance stuff much but have been dealing with a private banker who is guiding this reluctant money donor to the greedy.