Unconventional Mortgages and Loans | A Wealth of Information and Service
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A home equity line of credit allows qualified property owners to access available equity without refinancing their existing first mortgage. Rather than receiving one fixed lump sum, a HELOC establishes a revolving credit line that can be drawn from as funds are needed.
During the applicable draw period, borrowers can take advances, repay the outstanding balance, and access the available credit again. This structure can be useful when the total cost or timing of a project is uncertain.
A HELOC is secured by the equity in your property and is generally recorded behind the existing first mortgage. The lender establishes a maximum credit line based on the property value, existing mortgage balance, credit profile, income, and applicable combined loan-to-value limit.
Interest is generally charged only on the amount currently borrowed, not on the entire unused credit line. Most HELOCs have a draw period followed by a repayment period. Rates and payments may be variable and can change with the underlying index and margin.
Property owners commonly use HELOC funds for:
Because the credit line can be reused during the draw period, a HELOC may be preferable when expenses will occur at different times.
Traditional QM HELOCs commonly use W-2s, paystubs, tax returns, and standard debt-to-income calculations.
Non-QM and portfolio HELOC programs may provide additional options for borrowers who do not fit conventional underwriting requirements. Depending on the program, qualification may be available for self-employed borrowers, real estate investors, borrowers with complex income, or properties and loan amounts outside standard bank guidelines.
Available documentation methods may include:
Program availability and documentation requirements vary by lender.
Self-employed borrowers may have significant cash flow even when their tax returns show lower taxable income because of legitimate business deductions. Certain portfolio HELOC programs may review personal or business bank statements to establish qualifying income.
The number of statements required, treatment of deposits, allowable business-expense factor, and supporting documentation depend on the selected program.
Certain lenders permit HELOCs on non-owner-occupied investment properties. These programs can allow investors to access equity for property improvements, reserves, additional real estate purchases, or other eligible business purposes.
Investment-property HELOCs typically have different credit, equity, reserve, property, and documentation requirements than owner-occupied programs.
A HELOC is a revolving line of credit. You may draw, repay, and borrow again during the eligible draw period. The interest rate is commonly variable, and the monthly payment can change as the rate or outstanding balance changes.
A closed-end second mortgage provides a fixed amount of money at closing. It is repaid over a specified term and commonly offers a fixed rate and predictable monthly payment.
A HELOC may be better suited to ongoing or uncertain expenses. A closed-end second mortgage may be more appropriate when you need a specific lump sum and want a fixed repayment schedule.
Both a HELOC and a closed-end second mortgage can allow a property owner to obtain additional financing without replacing the existing first lien.
This can be particularly valuable when the current first mortgage has a favorable interest rate or other terms that the borrower does not want to lose through a cash-out refinance.
HELOC terms vary based on occupancy, property type, property value, existing liens, credit history, income documentation, requested credit line, and state availability.
Provide the estimated property value, current first-mortgage balance, desired line amount, property occupancy, credit range, and income type to receive an initial review of available QM, Non-QM, and portfolio HELOC options.
An initial loan-scenario review can be completed without an immediate credit check.