Sat through a HELOC closing in Austin and the paperwork scared me

I was helping my sister close on a home equity line of credit last Tuesday at a credit union near the Domain. The loan officer kept saying it was simple but the package was like 40 pages with weird clauses about rate floors and draw periods. Two pages in I noticed the fine print said the rate could jump 5 points after the first year if we missed a single payment, even by one day. My sister didn't even read half of it because she was just excited about the remodel money. I started asking about how the variable rate gets calculated and the officer got all cagey, said it's tied to the prime plus a margin that can adjust quarterly. We ended up walking out to compare offers and the officer actually called my sister's phone twice trying to get her back. Has anyone else had a lender hide rate changes in the fine print like that, or is this normal for HELOCs in Texas?

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lilykelly17d ago

Did you catch if that rate floor was buried in the initial disclosures or just the closing packet? That's the classic move, they hide the worst stuff until you're sitting at the table. A 5 point jump for a late payment is predatory, plain and simple, especially in Texas where homestead laws usually protect folks. The fact he kept calling her after you left says everything, he knew the deal was bad and wanted to lock her in before she thought it through. Good on you for walking, that's not normal even for credit unions, they're supposed to be the good guys. Always read the rate adjustment section twice, that's where they get you.