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Need to know more about HELOC

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Regular Contributor

Need to know more about HELOC

I need help understanding HELOCs.

 

I know they are a line of credit, but looking around I am finding mixed programs at different banks

 

The first and important question is: What credit scoring models are HELOCs scored with when applying.

 

Second:What is the best non aggressive HELOCroad to choose

 

If you take lets say  5 year HELOC out with interest payments, canyou renew this after the 5 years?  Is this a wise move or bad move to think this way?

Starting Score: May 23, 2016 EQ 537 TU 518 EX 548
Recent Score: November 29 2017 EQ 710 TU 680 EX 706
Goal Score: 720
Current Vantage 3.0: 706
Mortgage Scores August 18 2017: EQ5 684 TU4 692 EX2 690
5 REPLIES
Frequent Contributor

Re: Need to know more about HELOC


MrTom wrote:

I need help understanding HELOCs.

 

I know they are a line of credit, but looking around I am finding mixed programs at different banks

 

The first and important question is: What credit scoring models are HELOCs scored with when applying. Depends on the bank. Each and every single bank use different models. My bank pulls all three and uses the middle score

 

Second:What is the best non aggressive HELOCroad to choose HELOC's are variable rates. They go up and down with what prime is. Most banks use prime + 2% as their interest rates

 

If you take lets say  5 year HELOC out with interest payments, canyou renew this after the 5 years?  Is this a wise move or bad move to think this way? HELOC's are interest only payments for 10 years and amortizes for 20 years after the 10 years. You can renew a HELOC, but it's applying for a new one every single time. It depends on your situation if it's a bad or wise move.


 

Mortgage Loan Officer in Greater Chicago area plus 47 states.
Message 2 of 6
Regular Contributor

Re: Need to know more about HELOC

So some banks may use FICO8, some Vantage, some Mortgage scores?

 

I am finding banks with 15 and 20 helocs, and 5s

 

A Home Equity Line is written with a five year maturity with interest only payments due monthly with the balance due at maturity

 

Im still confused on HELOC programs.  The bold is what a bank emailed me

Starting Score: May 23, 2016 EQ 537 TU 518 EX 548
Recent Score: November 29 2017 EQ 710 TU 680 EX 706
Goal Score: 720
Current Vantage 3.0: 706
Mortgage Scores August 18 2017: EQ5 684 TU4 692 EX2 690
Message 3 of 6
Frequent Contributor

Re: Need to know more about HELOC


MrTom wrote:

So some banks may use FICO8, some Vantage, some Mortgage scores?

 

I am finding banks with 15 and 20 helocs, and 5s

 

A Home Equity Line is written with a five year maturity with interest only payments due monthly with the balance due at maturity

 

Im still confused on HELOC programs.  The bold is what a bank emailed me


That's their own product. For example, my bank offers a 10 year HELOC interest only payments and after that the amount leftover amortizes for 20 years. It really depends on what the bank does

Mortgage Loan Officer in Greater Chicago area plus 47 states.
Message 4 of 6
Moderator

Re: Need to know more about HELOC


MrTom wrote:

So some banks may use FICO8, some Vantage, some Mortgage scores?

 

I am finding banks with 15 and 20 helocs, and 5s

 

A Home Equity Line is written with a five year maturity with interest only payments due monthly with the balance due at maturity

 

Im still confused on HELOC programs.  The bold is what a bank emailed me


This is one of those times that it is best to pick up the phone and speak to the LO about their own HELOC program.

Ask them which scores they use: most likely mortgage scores, possibly FICO 8s but more likely mortgage scores. It is very unlikely Vantage scores will be used. The best resource for information is the LO that is handling the HELOC for you. 

Message 5 of 6
Moderator

Re: Need to know more about HELOC

Just to add you will find substantial variation in the HELOC market: to use mortgage speak, every lender is a portfolio lender when it comes to HELOC's, so they can and will do what they want.

 

Strongly encourage you to shop around (Internet research is fine) as there's some pretty wild variation between lenders, vis a vis my own HELOC is prime + 0.25% for example though prime +2% is pretty common for the big players as kc mentioned.  I wouldn't worry about the scores they pull, lot of HELOC's are pretty friendly underwriting i.e. mine at a CU was 675 EQ FICO 5 for their best rate when I got it... my long standing 693 was just fine there hah.

Starting Score: EQ 5 561, TU 98 567, EX 2 599 (12/30/11)
Current Score: EQ 5 771, TU 4 758, EX 2 758, EQ 8 795, TU 8 762, EX 8 786 (7/28/17)
Goal Score:    EQ 5 750, TU 4 750, EX 2 750, EQ 8 800, TU 8 Blah, EX 8 800 (01/01/18)


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Message 6 of 6