Is this heloc straight?

Question

I am new to helocs. Taking out a heloc on my primary, no mortgage note. Comps in my neighbor peg house value at $348K. If a bank does 80% but is availing a $220k line. Am I on the loss for something here? Why won't they offer a $278K or close? Why are they putting my primary value at $275K (80%=$220K.) Is this is standard bank practice or is the bank trying to protect themselves/hedge against future home value softening? Am I missing something, is this putting a risk on the house? Should consider this heloc with such a gap or is that enough for a hard pass?

P/S

I reached out to them about this but haven't heard back. WIll follow up on Monday.

Jay Hurst · Answer

To be able to calculate a debt to income ratio all the above is required.

Kerry Baird · Answer

I got one HELOC where they used a desktop or online type of valuation, which provided one value.  The next HELOC was obtained where the lender used a formal inside appraisal.  When I am looking for a HELOC that is a question to ask, along with the rate.  I also want to know how long the draw period is and how much the interest rate can increase in a set period of time.

Back to the appraisals: when I have a bland interior, the desktop might help with value, vs a newly remodeled house with snazzy kitchen, which has a higher value.  What is going to move the needle and get a higher valuation?

JayCinta Henry · Answer

I had considered that and decided on heloc, it being more like a revolving credit card, that gets interest charge on what's drawn. I will certainly re-consider.

On another note is it normal for lending bank to ask for documents related to ALL properties one owns-leases, insurance, mortgage statements? I thought this should be limited to subject property only?

Francis Jonas Helstab · Answer

Quick question, have you looked into just doing a cash out refinance on your primary that is free and clear? You should be able to find a better rate than what a HELOC is going to offer and it won't be a variable rate. Let me know if you have any questions, but that may be a better avenue for you at this point.

JayCinta Henry · Answer

I know everybody desires a better value and banks contend otherwise. Nevertheless, a recent house sold for $330k and it needed rehabbing in the range 20k. I think I am in the range. But I understand what you guys are saying.

Chris Seveney · Answer

@JayCinta Henry

When getting a loan there is always risk - risk the loan is not satisfied.

The difference is they value the house a lot less than you do.

Sergey A. Petrov · Answer

You may be overvaluing your property. The bank is looking at hard data they can see and with “desktop appraisals” they can be wrong too. The actual value, which will determine your 80% equivalent in dollars, would need to be substantiated by an independent appraisal