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Why do home equity loans have limits that are not found in cash out refis? Thks

by bmcmahon853 from Raton, New Mexico. Nov 23rd 2020 Reply


Charlie Sparks (CharlieSparks)
#9 ranked lender in New Mexico - 401 contributions

Good day,Cash out refis (conventional and FHA) on a primary residence are limited to 80% of the appraised value. HELOCs may be restricted to a lower percentage depending upon the lender's policies, the credit score of the borrower and other factors. Charlie Sparks, NMLS 195031 at Finance of America Mortgage in Albuquerque, NM

Nov 23rd 2020
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Bert Carpenter (BertCarpenter)
#37 ranked lender in Arizona - 2,236 contributions

Traditional mortgages have their Loan-To-Value (LTV) caps set by the agencies that purchase the mortgages on the secondary market. Today, that is 80% of the appraised value. HELOCS are typically underwritten by the bank or Credit Union according to their own criteria because the account will remain in their own portfolio, and not be sold. This means the lender will have either a higher or lower LTV cap, depending on their own risk tolerance. Some chose a lower LTV because if you default, the only way they can get their money back is to take over the First Mortgage and assuming the risk for the entire amount. Others may set a higher limit, for really strong borrowers, because they are willing to accept the risk. ~ Bert Carpenter, The LoansA2z Team of NEXA Mortgage ~ NMLS 40586 ~ At NEXA, we've got you covered. We are licensed in all states except VA and we're pending approval in MA and NY. ~ www.ApplyYes.com 480-889-9000.

Nov 23rd 2020
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