HELOC with zero balance

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HELOC with zero balance

Stephen Gibson Jr
New to Real Estate · South Jersey · Member since 2023 · 15 posts · 14 votes

Hey everybody, 

I'm considering getting a HELOC to have some small repairs done on my primary residence.

If I were to say get a HELOC for 50k, use around 10k for these repairs and pay it off after a few months... when I go to get a mortage on a new property, would it impact me if it had already been paid off?

Or is it literally like a credit card, where they look at the actual balance or total line of credit?

Thanks

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Bryan Johnson
Lender · Nashville TN · Member since 2021 · 7 posts · 2 votes
3y

Typically the lender wouldn't count a monthly payment if it showed that there was no balance. If you paid it off a month or two before pulling credit, it would show a $0 payment on your credit report as well, but you could still show a payment on your credit report but get documentation showing that it's paid off and be good to go. I've never had to count the payment as if you withdrew the entire heloc amount, i suppose there could be some banks out there with additional overlays? This shouldn't be an issue at all.  

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Stephen Gibson Jr

    Depends on the lender, some will count it and some will not because you have the ability to pull that money. It will depend on the lender.

    My recommendation is to speak with the lender and find out if they will use it against you.

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  • Allan Smith
    Contractor · Nashville, TN · Member since 2014 · 1k+ posts · 1k+ votes
    3y

    That is generally the case as Chris said, but I think it is most common for them to run the numbers as if you have the line of credit fully drawn to the max. It's unfortunate

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  • Bryan Johnson
    Lender · Nashville TN · Member since 2021 · 7 posts · 2 votes
    3y

    Typically the lender wouldn't count a monthly payment if it showed that there was no balance. If you paid it off a month or two before pulling credit, it would show a $0 payment on your credit report as well, but you could still show a payment on your credit report but get documentation showing that it's paid off and be good to go. I've never had to count the payment as if you withdrew the entire heloc amount, i suppose there could be some banks out there with additional overlays? This shouldn't be an issue at all.  

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  • Stephen Gibson Jr
    OP
    New to Real Estate · South Jersey · Member since 2023 · 15 posts · 14 votes
    3y

    Appreciate the replies !

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  • Ash Hegde
    Lender · Fort Lauderdale, FL (Lending in FL CT GA MI PA) · Member since 2022 · 470 posts · 349 votes
    3y

    It will depend on the lender as others have said. When you are getting the HELOC, that lender will likely qualify you assuming it is fully drawn so they know their maximum exposure, but afterwards if you keep a zero balance you should be able to find a lender that will not count it against you for other mortgages.

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