Credit Line Close Off

[ontherocs]

My home equity line of credit has been reduced to $0 by the bank. I have no balance. I called and asked that the account be closed and they said it would cost $400 and $40 reconveyance fee. I can see the reconveyance fee but the $400 for a service they no longer offer to me!!!! Is this legal?

[Austin]

This is not illegal. You would benefit by leaving it open however and just not using it if it has been used in the past. Basically any revolving credit that you have never been late on should never be closed or it will lower your credit score.

[ontherocs]

Thanks Austin,
the reason for this, is that there is another bank who has no problem with issuing the exact credit line to me but they cannot go in third position. I don't use the credit line but want it there should I get laid off.
I never used the credit line with Chase, have had it two years, have a credit score over 800, never delinquent on a bill, mortgage, never. My home is a very good area and certainly is not under water.

My credit line was for $75,000 and then they say they must set the limit to $0 due to market conditions.

Seems, like I have to pay for a service that Chase won't supply. What is the $400 for. Is it penalty for closing off a credit line I no longer have access to?

Thanks

[Austin]

Yes, they are just being shady by trying to keep you as a client so that when they can allow you to use your equity line, you will still be with them. If you have never drawn on the line it shouldn't hurt your credit much to close it but yes I am sure they will charge you the $400 penalty. What bank is it that you are able to use for the new line? I would suggest that if you are working on getting a new line that you do it quickly as they are disappearing left and right.

[ontherocs]

FYI my home is worth $1,100,000 and $1,350,000 and mortgage 1st is $500,000 and my equity line is $150,000. Chase told me to go get an appraisal. My home is the cheapest smallest square footage home within a mile.

What bothers me is that I just wrote a check for a car $30,000, first time I ever tried to use the equity line, and the check bounced.

Well's said they would give my $200,000 no problems. The rate is a half a percent higher though. I just hate paying people $400 who are stupid and going through the hassle.

[Reality]

The banks are just doing anything and everything they can to squeeze another dime out of borrowers before the titanic rolls over. The $400 fee is entirely an extorsion to make you buy them out of the 2nd position; think of it as the backend load fee. IMHO, Wells may do the same thing very soon; that's the nature of revolving credits; terms can be changed every billing cycle. I wouldn't take a HELOC for buying a car nowadays; the car mfrs have many sweetened fixed term loans and leases. When FED rate and LIBOR rate go up after the real inflation is out of the bag, any indexed rate loans can be a lot of pain. JMHO of course

[suzseaside]

I would call and ask them to reopen a balance limit again. One of my clients had same situation and he called and ranted about his great score, low ltv, etc. and they reopened the line the next day.

Otherwise - since they have essential "closed" the line to a zero availability, they can waive their own early closure fee for terminating the line.