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#1690703 - 04/19/12 09:59 PM HELOCs and Balloon Payments
BNKO Offline
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Can a variable rate HELOC have a fixed monthly payment, as long as a balloon payment is disclosed?

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#1690720 - 04/19/12 11:47 PM Re: HELOCs and Balloon Payments BNKO
rlcarey Offline
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rlcarey
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Galveston, TX
Where would you disclose a balloon payment on a LOC when you have no idea what the balance might be on any given day?
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#1690766 - 04/20/12 12:32 PM Re: HELOCs and Balloon Payments BNKO
ahou Offline
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ahou
Joined: Aug 2002
Posts: 3,094
BNKO, are you referring to a balloon pmt clause in the note? You'll see this clause where there is no repayment period. Usually you'll have a min pmt amt such as $50 or 2% of the bal, but I haven't seen a fixed pmt on a variable rate HELOC before. How would you determine such a pmt? The bal could vary greatly. A HELOC is open-end credit.
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#1691088 - 04/20/12 05:02 PM Re: HELOCs and Balloon Payments BNKO
BNKO Offline
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Thanks for the input.

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#1691203 - 04/20/12 07:09 PM Re: HELOCs and Balloon Payments BNKO
Dan Persfull Online
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Dan Persfull
Joined: Aug 2002
Posts: 46,840
Bloomington, IN
You can have fixed payments as long as your software will handle it.

The $10,000 payment example on the plan disclosure will show what the balloon payment will be based on the fixed payment and the $10,000 advance.

In the note itself you don't have to disclose the balloon payment. The note will say something similar to:

At maturity I will pay the entire outstanding loan balance in full.

You will have to be sure the "negative amortization" language is present if the fixed payment is not enough to reduce the balance.

Call your software vendor. I'm sure their customer service reps can help you set it up.
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#1995824 - 02/12/15 10:56 PM Re: HELOCs and Balloon Payments BNKO
Jan94 Offline
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Joined: Mar 2001
Posts: 828
USA
I found this thread and have a similar scenario. Bank wants to "modify" the HELOC to a fixed PAYMENT but leave the rate variable. The HELOC has not matured. The question was around disclosing a balloon but I understand that as long as we have language stating the balance has to be paid at maturity that should suffice. So I am good there--the modification document includes that statement. The concern comes where the rate remains variable and the payment is amortized out say 15 years. During the 15 years prime goes up and now the payment may not be enough to pay off the balance. If we add the negative am language, are you saying that would be sufficient? Thank you.

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#1996011 - 02/13/15 06:04 PM Re: HELOCs and Balloon Payments BNKO
fmissle Offline
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Joined: Jul 2007
Posts: 995
Pac NW
I wouldn't personally want to allow negative amortization.

When I've had a similar product in the past, we included language which said the payment would be X, but if the increase in the interest rate caused the payment to not satisfy accrued interest, the payment would be raised to cover all accrued interest.

Something like that.... it's been awhile.

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#1996160 - 02/13/15 10:05 PM Re: HELOCs and Balloon Payments BNKO
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 79,633
Galveston, TX
You are modify the HELOC into a 15 fixed term loan??? If there is no potential for future draws, that would no longer be a HELOC it would be a closed-end mortgage.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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