When you go to the bank to get your HELOC, make sure it is
actually a Line Of Credit and NOT a Home Equity Loan.

It must have the following features:


1. Must be an open ended Home Equity Line of Credit.  In other words, you must be able to run up the balance and pay it down at any time.  A home equity loan with fixed payments will not work the same.

2. Must have an interest only payment option.   There should be no scheduled principal payments, just an interest payment that is made during the month.  You will be "over paying" your HELOC by placing your entire paycheck in it, so there won't be much interest.

3. Your HELOC must have a variable rate.  In most cases it will be Prime+ or Libor+, if you have very good credit and a good relationship with the bank you may be able to get a rate below Prime.

4.  If you earn $5000 per month that you will be depositing it into your HELOC, only transfer $5000 of your mortgage balance to your HELOC.  Since the HELOC has a variable rate, don't transfer more than you have to in order to take advantage of the Interest Offset benefit.

BEST functionality for writing checks from your HELOC:

• Look for the lowest dollar amount minimum per check writing from HELOC.
• There should be No Fee per check written from HELOC.
• There should be no limit to the number of checks written from HELOC each month.
• Shortest amount of time to clear and process checks from HELOC account.

BEST functionality for on-line banking:

I encourage you to have your HELOC and checking account at the same bank if possible, this will allow for the easiest transfers between accounts.  If however, your bank doesn't offer a competitive product and you wish to keep your current checking account just make sure it will be convenient to transfer money.

• Ability to transfer money from checking to HELOC and HELOC to checking.
• No limit to the number of transfers per month.
• No fee for on-line transfers.
• No dollar amount limitation on transfers.
• Ability to link HELOC to Checking account as an overdraft protection.
• Shortest turn around time for posting on-line transfers to designated accounts.
• On-line bill pay, preferrably with no fees.

Questions You Will Be Asked At The Closing Of The HELOC:

Q. Lenders will ask client if they want their monthly Equity Line payments automatically withdrawn from a designated checking account.

A. No.  This will amortize the HELOC payment to one time per month, which defeats the purpose of using the HELOC.  An open line of credit calculates interest based on the average daily balance.  This reduces the interest you pay each day that your paycheck sits in your account.

Q. Lenders will ask client if they want to lock their rate.

A. No (this will remove the "interest only" payment option).  By using the program the way it's designed, your equity can dramatically increase, while improving your credit rating.

The functionality of your HELOC is more important than the actual interest rate, because you won't be carrying much of a balance on your line of credit.  If your total take home pay is $5000 per month, you will only be carrying a $5-6,000 balance on your HELOC ( enough to offset your deposit).  Therefore, the functionality and convenience is much more important than the interest rate.