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70% LTV when combine 1st and HELOC?

Appraisal came in high enough to provide better than 80% LTV on a combined 1st of $385K and HELOC of $177K but above 70% LTV.

Bank said since HELOC is a type of cash-out, max LTV is 70% - logic in this?  Bank holds both loans, WA State and want to roll both into one loan...

Thank in advance.

(Seattle area)
  • September 19 2010 - Candelaria Arenas
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Answers (5)

Profile picture for rohiii
Thanks Clay, just wanted to make sure I wasn't missing something...

Looking 30-year fixed and will likely have to just refi the 1st and leave the HELOC as interest-only and in its variable-rate state.  OK for now, but Prime will eventually move and it pretty much only has one direction to go...!
  • September 20 2010
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All loan originators agree with you :), there is no logic to it. Are you wanting a 30 Yr only or can you do a 15 Yr or Arm? 

  • September 20 2010
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Profile picture for rohiii
Thanks Clay, so apparently the 70% is actually generous...though the logic STILL escapes me (not your answer though - thank you for that).

A loan structure that strengthens both the borrower's and lender's status and still has more stringent guidelines - is this gov reg at its finest?

Strictly an academic question at this point, but am I missing something?

BTW, when you mention higher rates for fixed, approximately how many basis points are we talking?

Thanks again for your time.
  • September 20 2010
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As HUGD said, 70% would be a gift meaning guidelines cap the LTV at 60% for cash out so if your lender is saying they will give you 70% it is a gift. If a Heloc was not used as a piggyback to purchase the property, then paying it off along with the first mortgage is considered a cash out refinance, 740 score and 60% LTV. You can get around those guidelines by refinancing with a portfolio loan, Arm rates competative but Fixed rates higher than High Balance Agency loans.   
  • September 20 2010
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Thanks for your response, and maybe the answer to my question is because the loan would be high conforming...(therefore 70% LTV kicks in?)

I also may not have been clear enough...The 1st mortgage is from 2005, was a refi at that time, and is held by Wells.  The HELOC (also with Wells) was put in place in 2006 and was used ENTIRELY for an expansion and remodel of the house - does this make a difference?

I guess what I don't understand is why the LTV requirements are higher when combining a first and second versus a straight refi of a first (if we were to assume that the first was for $556K instead). 

What am I missing in the following - The new scenario would provide a lower combined payment (less than the two payments now being made, thereby lowering the overall risk profile for the loan) and, with the HELOC disappearing, would have a principal reduction amount included in each payment, unlike the interest-only structure of the existing HELOC...Sorry, still missing the logic...(?)

Thx

  • September 20 2010
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