HELOC is taking too long--what to do?

talley_sue_nycFebruary 18, 2004

We're cutting it close; we applied for the HELOC in early December, and had lots of forms to send in, etc. (it's a co-op apartment, so there's a third business entity in the transaction). Then the lawyer collecting the material said "we don't have the UCC-1 form" when she did, and "the proprietary lease info is not complete" when it was.

The loan is at the underwriter's, first chance to close it is Tuesday, first chance to withdraw funds is (if I'm remembering right off the top of my head) Wed or Thurs due to the waiting period.

Construction starts Monday, though, and we need to be able to write a check for a huge chunk of the final payment then. Plus, we're paying for the remainder of the cabinets tomorrow (we already paid half down out of savings). We paid for appliances out of savings.

We'd hoped to do this whole thing off the HELOC, and leave the savings untouched. But at this point, there won't be much left to cover w/ the HELOC.

We *have* the money in savings, but we didn't want to deplete it, which this nearly will (my DH is working from home so he's not bringing in much, and his comfort level requires a sizable savings account). We paid off the mortgage a year or two ago, and were hoping to just use the mortgage-payment part of cash flow to pay off the HELOC at .75% above prime.

So, do we just deplete the savings account?

Do we pay our savings account back out of the HELOC?

Do we use the credit-card checks to cover the gap--use them to pay the contractor & cabinets, and then pay off the credit card bill in a week and a half w/ the HELOC checks?

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joyfulguy

Will the bank or credit union be willing to make a short-term loan?

joyful

    Bookmark   February 19, 2004 at 7:20AM
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talley_sue_nyc

the paperwork would take longer than the HELOC coming through will. We're talking days here, not weeks or months.

I have the credit-card checks available if I need a short-term loan. I'll be able to pay them off before they even come due.

    Bookmark   February 19, 2004 at 10:14AM
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joyfulguy

If you can come up with the money within a month, so that you can pay the heavy balance on the card, in full ... you're laughing, aren't you?

Which of your suppliers accept the card?

If a builder doesn't, better pay your cash on hand to him, so you can write that person a cheque.

Pay retailers, suppliers, of product, etc. by card - for if you write cheques to them, and have to write one for the builder as well, you'll need to use the card to get a cash advance - on which you must pay interest from the day of the loan.

Good luck - hope all works out well for you,

joyful guy

    Bookmark   February 19, 2004 at 2:20PM
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talley_sue_nyc

nobody who's left accepts a card--it's all checks or cash from here on out, and both of us prefer checks.

it just seems silly to replenish savings from the HELOC.

    Bookmark   February 19, 2004 at 3:08PM
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janetwilson

Consider the savings withdrawal as a loan that you will pay back w/the funds from the HELOC, rather than the view that you are taking out a HELOC just to put into savings. I think it's just how you view the transaction. Most credit cards charge a fee to use cash advance checks - using savings would avoid any fee you might be charged.

    Bookmark   February 19, 2004 at 5:29PM
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joyfulguy

Hi again, TS,

What rate of return are you making on your savings?

Probably peanuts.

What rate will you have to pay on the HELOC?

What difference is there?

If you draw down your savings, is it the type of instrument on which you'll be forced to suffer a penalty when you liquidate it? Including commission to seller, etc.

If the difference in rates is substantial, it may seem wise to liquidate.

What prospect do you have that you may need some emergency money in the next while? Could you find the money elsewhere, if necessary?

Should you choose to liquidate the savings and do without the HELOC, do you have the self-discipline to reinvest the money regularly into savings that you would have been paying on the HELOC?

If you can, your savings will be replaced sooner that had you been paying a higher interest rate on the HELOC - for you'll have that difference in pocket.

Further - the interest earned on the savings would likely have been taxable but you might not have been able to deduct the interest paid on the HELOC.

Good wishes as you proceed with your plans,

joyful

    Bookmark   February 20, 2004 at 4:18AM
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talley_sue_nyc

The savings is easily tappable.

I'm thinking, the prospect that we may need the emergency money is sort of low, and if we needed it, we *could* tap the HELOC. They don't really care what you do w/ that money, right? So the HELOC can become our "safety net" until we build the savings ack up.

I've pretty much decided that we'll pull the first $9,000 (payable Monday) from savings, the remaining $9,000 from the HELOC (payable in two stages, a week from now, and a week after that, upon completion). Then we'll have two loans--one from savings, one from the HELOC, to pay back.

I think I can be organized enough to do that.

    Bookmark   February 20, 2004 at 12:15PM
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