PLOC to BRRRR?

[Young Park]

Hi BP!

I was wondering if you were to BRRRR using a PLOC to buy & rehab, would that affect your DTI, therefore affecting your cashout refinance?

Also, does anyone know the current PLOC interest rate? How much do they lend?

Thank you.

[Daniel Kong]

Hey Young! Nice meeting you at the meetup today. Just looking through your posts, and thought I would answer here so it helps others too. I've actually gone to the different local banks in Hawaii and opened up a bunch of PLOCs for this purpose (over 100k total lol). 

If you don't have any balance out, it doesn't count against your DTI. (At least it didn't for my lender) But whatever balance you DO have out will count against your DTI, and I think it will actually drop your credit score a little since that affects your percent of Debt used. (Also new hard inquiries and new credit doesn't help either) As far as how it affects your DTI specifically, each bank calculates the minimum payment due differently, so you will have to go bank to bank to see how they calculate the minimum payment on your balance. For instance, First Hawaiian Bank calculates the minimum payment to be 2% of the outstanding principal plus whatever interest was accrued during that month. Let's say you had 20k borrowed for the entire month, and your interest rate was 5%. The minimum payment due would be 400 (the 2% of principal) + 83.33 (The 5% interest for that month). So the debt calculated in your DTI would be 483.33. Other banks will just do a straight 3.25% of principle etc. I've got a list of a bunch of bank's interest rates, products, and general info that I can give you on the side. Or if anyone else wants this info, just PM me.