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Updated 6 days ago on . Most recent reply

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Kevin Lindahl
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10
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HELOC Advise for Debt Consolidation

Kevin Lindahl
Posted

Hello All - We recently decided to apply for a HELOC on our primary home to pay off all revolving debt, etc.. We found a lender here on BP forum and applied.

Initially , based upon the data we provided, we thought we were looking at close to 7.5% to 7.75% rate but after submitting all the required info we've jumped up to 8.625%.  My wife and I pulled FICO 8 scores yesterday before applying (850 for her and 830 for me).  The lender said we're at 749 for their needs.  Here's a snapshot of what they provided:

(I'm the top one and my wife is the bottom.)....Keep it clean....LOL
 

They said our LTV is "just under 70%". We owe right at $520k and their "electronic" appraisal came in at $911,217. (I calculate that at about 68.75%)
Based upon the chart they provided (below) it puts us at prime + 1.125% (Which is the 8.625% they're quoting)

Here's my issue with all of this....
1.  With our FICO 8 scores so much higher, WHY are the scores they pulled so much lower? Is it a way for them to "manipulate" their rate?  WHICH FICO score are they pulling that is SOO much lower?  

Here's what the lender said:

They use a matrix of FICO and LTV for rates.

As for FICO, all lenders take the middle score, and for 2 borrowers, the lower one.


My question to you all is.
...Are there better rates out there right now for same scenarios?
Or are we getting a "fair" deal right now based upon the variables provided?  (For example, BofA offered 8.75% with ZERO closing costs and 6 months at 6.75%.  One of our credit unions offered 7.875% without closing costs.)

We just don't want to pull the trigger on something  that doesn't make sense and after a 1-5/8 point increase I'm not sure we're making the right decision.

As always, thank you all for your help!

Most Popular Reply

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Matthew Crivelli
  • Lender
  • Massachusetts
954
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1,504
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Matthew Crivelli
  • Lender
  • Massachusetts
Replied

Lenders are not using Fico 8. A mortgage pull is going to calculate a different score. Also, is it really wise to tie up consumer debt into your primary residence? I look at my primary as a savings account, not a piggy bank. The smartest move is to cut spending / downgrade lifestyle and paydown down the debt, not tie the debt into your biggest asset, your home. Just my 2 cents. 

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