Got a letter from the bank today...

[BORIStheBLADE]

So early this year I got a home equity line of credit on my house to buy my A/C and for emergencies. The amount was for $37000.00. I really didn't need that much, but they gave it to me anyways. So as we speak I spent $11,000 of it so far and didn't plan on spending anymore.
Today I got a letter from the bank stating that since my property value dropped a significant amount the HELOC was reduced to $12,000. This didn't really bother me at all, but got me thinking. My interest rate was for the $37,000 now since I have less I feel it should be a lower amount. Do you guys think I have anything to stand on with this idea?

 

[tuffy]

So early this year I got a home equity line of credit on my house to buy my A/C and for emergencies. The amount was for $37000.00. I really didn't need that much, but they gave it to me anyways. So as we speak I spent $11,000 of it so far and didn't plan on spending anymore.
Today I got a letter from the bank stating that since my property value dropped a significant amount the HELOC was reduced to $12,000. This didn't really bother me at all, but got me thinking. My interest rate was for the $37,000 now since I have less I feel it should be a lower amount. Do you guys think I have anything to stand on with this idea?

Interest rates are usually structured according to the loan term, not the amount and you will only be charged interest on the amount used ($11,000), not $37,000. I doubt you have any recourse or that you were over paying in any way but without seeing your loan docs, I can't say this with 100% certainty.

 

[CWS]

Tuffy is right. THe interest rate was based on your ability to draw down not on the amount. This is happening all over. Feel fortuneate. Lots of people upside down and a lot of banks are nervous. I know people with really low rates that drew down the max.

 

[BORIStheBLADE]

I kind of figured, but wanted to give it a try.

 

[oneaday]

Equity lines are secured by the equity in your home. Intrest rates are based on what the lending bank charges for said loans. Usually a line is based on the prevailing prime rate, fluxuating up and down as the prime rises and falls. Depending on how long you have had your equity loan, it should be a lower rate now than say six months ago, as the prime has been going down.
That being said, I'm in the snake oil business WTF do I know about interest rates?

 

[Boppa-Wasch]

What kind of snke oil?

 

[oneaday]

Rust and Dust, Mop and Slop and Croak and Choke are a few of em.

 

[Boppa-Wasch]

What......No Zip & Rip?

 

[dpricenator]

Your rate was also determined by your LTV/ Loan to Value ratito. You could have acctually had a lower LTV when you first got your loan than you do now, depending on how much your value went down. Meaning you may be paying a lower interest rate now than you would have had you received this loan at your current LTV earlier this year.

 

[CWS]

Your rate was also determined by your LTV/ Loan to Value ratito. You could have acctually had a lower LTV when you first got your loan than you do now, depending on how much your value went down. Meaning you may be paying a lower interest rate now than you would have had you received this loan at your current LTV earlier this year.

Well put Dave.

 

[dpricenator]

Well put Dave.

thank you sensei. :thumbsup:

 

[jwintosh]

yep! had that happen to me too! all this extra money gone!! i actually challenged it, due to my first had been reduced signicantly and my stellar credit rating. they showed me to the proverbial door!

 

[BORIStheBLADE]

So them doing this to me lowers my credit score? WTF!

 

[tuffy]

So them doing this to me lowers my credit score? WTF!

This should have little to no impact on your credit score. Without seeing your credit (I'm not asking to see it, because I don't want to), this may or may not affect it. Sometimes having too much open credit can hurt your score and adversely, not not having enough open credit (with little to no balance...of course) can hurt your score.

Knowing what factors truly affect your score really are a mystery that only the three credit bureaus know (and they all differ). In your case, I don't think you have anything to worry about.

If anything, you should be happy that the temptation of spending that extra $26,000 has been removed.

 

[jwintosh]

So them doing this to me lowers my credit score? WTF!

no! i wanted that pool of money left untouched. the only way they would do it was to have their appraiser come out 'on my dime' and assess the value of the home. sorry for the confusion.

 

[stogies&hoagies]

First off, I would just ask the lender. Your interest rate for the LOC should be based somewhat on your credit score and also on the prevailing rates that institution is using for LOC's. It may be fixed or variable.

Your credit score is based on your debt ratio to borrowing power, not on any one particular loan, but taking all your debt and figuring all your net worth and the difference between what you could borrow based on your assets and what you have borrowed through loans, credit cards, mortgages, etc.

This is about the same thing Dpriceinator is saying.

Oh yeah, another thing that the credit bureaus look at when setting your score is if there are any late or missed payments in your history.