Mortgage Blog

There are more borrowers have $0 balance on the current property or renbtal houses. The advantage is 1)Use it as the emergency fund source 2)use it as cash-offer to buy rentals.

But it do have disadvantage when we try to have purchase loan or refinance.

Most of the lenders will use 1% of the limit as your monthly debt. So if you have a $500k limit on the primary, the lender will caculate it as monthly debt of $5000. This will definetely affect the DTI calculation(we do have one lender does not count this debt if the balance is zero). So in order to proceed the transaction, we will have to close this HELOC or reduce the limit from this HELOC.

It is still a pain even after the HELOC lender reduce the limit on the subordination. They will have to reduce it and have a modified HELOC agreement. If you fail to get this modified agreement, the loan will fail as well.

We have a few loans have temporary problems because of this HELOC issue. And the rate wil expire soon because we can not get the modified agreement within the lock period.