More Things You Need to Know About a HELOC
0:30 Well, good afternoon, Michiganders, and welcome back to Tuesday with Tom Michigan's Only podcast, where we talk about estate planning, a state settlement, and everything in between. As always, I'm your host, Tom Doyle, a state planning attorney, lifelong Michigander, and your guide to planning for your future. Well, in the last episode, I talked about protecting your home from fraudulent deed transfer with a helock. Basically the concept being that I talked a little bit about the problem with fraudulent ded transfers, what a helock is, and how that might be of assistance to you. While following that theme today though, I wanted to share a few things basically more things that you need to know about a helock.
1:26 But remember what I'm about to discuss is meant to be educational and informative. It is not legal advice. Certainly, every person's situation is different, so to be sure to talk to your own attorney, your financial advisor, your banker, whoever it is that you're working with to figure out what makes the most sense for you and your planning. So more things you know to be about a helock. Before we talk about that, let's just go back revisit the last episode, and I talked about the protective role of a heelock. And first, what's a helock. Well, if you listen to last episode or perhaps you already know, helock is a home equity.
2:25 Line of credit. Now, what I talked about in last week's episode was using a heelock to basically put a lien against your home. Essentially, that's so important in order to try and prevent title fraud if your home is owned free and clear. So if your home's owned free and clear, but you take. Out a heelock, that will put a. Lien on the property, and in order for someone to fraudulently transfer your title, they have to deal with that lean that's on the property. So because of that, it basically adds a layer of scrutiny and verification before anybody could transfer your home or put a lien on it, all from your end with the goal of making sure that you have done what you can do to protect your home from the fraudsters. So you've listened to last week's episode, you're thinking about having a helock. I just wanted to follow up today with a few considerations for you when you're out looking at your heelock, and you're likely going to find a helock. I mean, I started trying to put together a list of all the various credit unions and banks in the state of Michigan that offer helocks, and because so many of them did, I decided that it really wasn't appropriate or time appropriate for
3:57 me to put that list together. You're probably going to contact your credit union that you're dealing with, or your bank that you're already dealing with, or some financial institution in your community in looking for a helock. So if you're going to do that, some of the considerations that you have in looking for helock are one. I talked about having the helock in particular to put a lean against your home, but you're not going to draw any funds from it. It's simply going to be there as a lean against the home, just in case someone works to try and transfer your title.
4:37 Well, question for. Your credit union or bank, are there any requirements relative to the helock that you're considering even if you don't draw? For example, are there going to be any annual maintenance fees? Maybe you're not going to draw on the helo, but it might the bank credit union might charge annual maintenance fees on the heelock, even if you don't draw on it maintenance costs. There might be maintenance costs, there might be appraisal fees, there might be title search fees, or insurance fees. So there's a number of costs that might be incurred upfront in taking out the heelock. Your credit union might want to have a title search done, or they might want to have appraisals done on your property, or they might have certain concerns about what insurance you're carrying on your home. So a number of costs might be something that's going to be curred upfront, and you need to know what those are. And some of those fees will still apply even if there is a zero balance on the account, particularly annual maintenance fees or maintenance fees in general, to keep the account with your financial institution.
6:05 Another consideration, what is the lean status and what do I mean by that? Well, you want to be sure that once the lian is approved, the bank does in fact record a lien in the county records. If you go and you get the heelock intending to have a lien placed on your property, the purpose of which is to discourage anyone from trying to fraudulently transfer your property. You want to be sure that the lien has been recorded, so you can ask your financial institution to provide your documentation that it's been recorded, or if they haven't done that, you might want to reach out, probably get up online.
6:54 Most of the registered deeds offices are now online, just to double check to make sure that that lean has been recorded. Second, what you also want to confirm with your credit union or finance institution is what exact documentation is going to be filed. Is it the helock itself? Is it merely a memorandum excuse me reflecting the terms of the helock, so that you understand and you are sured that whatever it is that was recorded by your credit union or bank, you still return all rights of ownership to the property except for the lean.
7:47 And that's pretty standard stuff. So unless you've got a real problem with your credit in your bank, that's not likely going to be a problem. But you need to know. So you need to know it's been recorded, and you need to know what has been recorded. Another consideration, so if you've. Taken out this helock, and again the purpose of it was not to draw any funds, but was to simply have the lean against your property. Well, you need to know because normally when a helock is set up, there is a draw period, a period of time in which you can withdraw funds on the helock. Well, what you need to know is what happens when that draw period ends, and if you've taken any funds, what are the when does the repayment period begin? So, once you have this helock in place, there's going to period of time again in which you can draw funds on it, and then there's going to be a time at which you have to start paying it back. Well, what if you'd never draw any fund which is what I was talking about using the heelock for, Well, you might still well, obviously you still have to satisfy whatever terms the repayment phase has, which in some cases might include closing or somehow converting
9:19 the line into perhaps a more traditional type mortgage on your home, or perhaps a personal line whatever it is that the banker credit union has in place. But the problem is is if you've taken out this helock again the purpose of which to was to put a lien on your property, and you've never drawn any funds on it. If that helock is going to go away after a period of time because you've never used it, you need to know that because if it's let's say it's going to go away after I don't know, pick time ten years, and if you don't draw any funds on it ten years up, that helock's going away. And in that case, all likelihood your credit in your bank is going to file a discharge of the helock.
10:12 Well you need to know that because when that. Happens, now you're right back to having the problem which you were trying to fix, which. Was you don't have a lean on your property. So need to know how long this protection, if you will, that you've created by that helock is going to work. Another consideration in looking for a heluck is can the bank or credit union reduce or cancel the lean or the line of credit if you will, if it's on you. So for example, what do I mean, Well, some lenders will include clauses that allow them to reduce credit limits or freeze or terminate unused line of credit depending upon changes in property value, changes in your credit or your financial condition, etc. So you need to know that because if you create this lean against your property. And if you are thinking, hey, another consideration for having this helux set up is what if I need money? What if I didn't? I don't need it now? And not only though, am I going to put a lean against my property?
11:34 But one of the considerations I discussed last time was that you then have access to funds, perhaps in an emergency against your home. Well, you need to know if that amount, which is the line of credit that's been provided to you, somehow ends up getting reduced or changed or even terminated based upon changes in your property value, your credit, financial condition, et cetera. So you need to understand can your bank or credit union reduce or cancel the line of credit. If it's not used. Another consideration, so what are some risks?
12:19 What are the risk? Well, because the lean helock is a lean on your home in some legal scenarios or default, if you violate terms, you might be exposing the home to foreclosure action. What do I mean by that? Well, many times if you have a mortgage against your home or a helock, which is a type of mortgage against your home, there might be provisions in it. That say something like, hey, if you. Go bankrupt, just use the most common scenario, we then might be able to declare the entire mound. Do why because you're no longer a credit worthy candidate. So you need to understand that when you put this lien on your home, there may be things that happen outside of the helock that could be considered a violation of the terms of the helock, and in that case you might be.
13:21 Exposing the home to some risk. In summary, then yes, considering a helock, I think is still an important consideration, particularly as I discussed last time, when you've got your home paid off. And again, if you don't remember what I'm talking about, please go back and listen to last week's episode where I explain that more in detail. But some considerations are there going to be requirements or cost even if you don't draw on the line, what is the lean status? Make sure that as in fact has been recorded, what's the draw period and what happens after that? Can the bank reduce or cancel a line or perhaps cancel a lean if it's unused?
14:09 And then understand are you exposing your home to any risks outside of the helock? So in summary, if you've paid off your mortgage, you might want to consider helock as a tool to protect your home from fraudulent deed transfers. If you intend to use the helock though in this way, you'll need to request basically full disclosures from your financial institution. So that you know what exactly. You are siding onto when you have that helock, so understand how it works. In particular, understand how it's going to work if you draw. Don't draw any funds. So I encourage listeners, I encourage you to review your own situation, speak with a trusted lender, consult with a legal professional for appropriate advice. As you are in search of using a helock as a way to secure that title to your home. Well, obviously Amanda and I were not bankers.
15:50 We don't provide helocks, but with respect to other needs that you have concerning your estate plan, whether it means creating a new estate plan for you, updating and existing one, guiding you through the estate settlement process in a difficult time, or any further discussion about how you might utilize a helock as a. Tool for securing your home. We try to make it easy for you. We offer in person appointments available both in Grand Rapids location and our Lansing location. We offer virtual consultations that will be by zoom or phone wherever you are in this great state of Michigan. We have our Legal Store. Just all you need is one document. Maybe you're simply looking for a certificate of trust because you're selling real estate, or you need a new healthcare power of attorney, whatever happens to be browse and order legal documents anytime twenty four to seven through our Legal Store. And all of this and more information on how to schedule appointments, how to access the Legal Store virtual consultation, all of that is available at our website, Doyle LAWPC dot com. So visit Doyle LAWPC dot com today to get your consultation scheduled and we look forward to the opportunity to work with you.
17:40 Sorry, push the wrong button. Well, I think that's going to be a wrap for today's show. As always, Oh, if you have a comment, a question you're like answered, or a topic that you'd like me to cover in future episode, head over to Tuesday with Time dot com. You can leave me a voice message by clicking on the microphone or just send me an email. That would be Tom at Tuesday with Tom dot com. Be sure to follow us on Facebook, invite your family and friends to do so as well, and that again would be Tuesday with Tom. We would invite you to follow the office on Facebook and Joyle Law PC, and don't forget subscribe to our email list at Tuesday with Tom dot com to stay up to date with new episodes and important estate planning tips. And remember too, you can listen to the show wherever you enjoy your podcast. We're on Apple Podcasts, Spotify, Amazon Music, Google podcast, iHeartRadio and Speaker and many many other channels where podcasts are available, and you can always ask your smart speaker to play Tuesday with Tom. Well, thanks again for spending part of your day with us, and as always, have an awesome day and an awesome week in Michigan.
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