HELOC instead of mortgage?

[kanabel]

Hi there!
I know there had been many posts here, if HELOC is better than mortgage, or so. However, my question relates, if getting secured LOC instead of mortgage would affect credit file and score, as it would be placed as revolving account, and therefore in same class as credit card or unsecured LOC, I assume. Since it`s maxed out as LOC (interest only, no repayment), sitting on credit file like that, would it be great burden for your TDS ratio and score, instead of regular mortgage whereas most of them don`t even appear, and even if they do, they are stated as "mortgage". I have an option of taking either, so I am in dilemma, as I wouldn`t like to block myself for future purchases, with "artificially" bad credit. Thank you!

Dejan

 

[Thomas Beyer]

Assuming you are telling the truth on your personal networth statement when applying for a new mortgage it should have NO effect on your TDS score and thus, creditworthiness.



Think of a secured LOC as an interest only mortgage. It is still debt, secured by real estate.



Related posts:



LOC vs. mortgage: http://myreinspace.com/public_forums/Real_Estate_Discussion/62-2302-What_is_better_a_mortgage_or_a_line-of-credit_.html



Are you too levered ? http://myreinspace.com/public_forums/Real_Estate_Discussion/62-10823-When_are_you_too_levered_.html

 

[kanabel]

QUOTE (ThomasBeyer @ Dec 3 2009, 07:37 PM)
Assuming you are telling the truth on your personal networth statement when applying for a new mortgage it should have NO effect on your TDS score and thus, creditworthiness.



Think of a secured LOC as an interest only mortgage. It is still debt, secured by real estate.



Related posts:



LOC vs. mortgage: http://myreinspace.com/public_forums/Real_Estate_Discussion/62-2302-What_is_better_a_mortgage_or_a_line-of-credit_.html



Are you too levered ? http://myreinspace.com/public_forums/Real_Estate_Discussion/62-10823-When_are_you_too_levered_.html




Thank you Thomas, as always. However this time I am referring to beacon score in particular (maybe I shouldn't have mentioned TDS). Recently, I had my score declining, due to increased debt on both secured and unsecured LOCs. My concern was regarding this, that both types of LOCs are classified as "revolving" on Equifax/Transunion report. How does the system distinguish between secured and unsecured? So, if you get new LOC (secured) of let's say $200k, that's means right away you have new "revolving" account, 100% used, and it's more likely to stay that way since it's preferrable to pay interest only. How will beacon score get affected? In case of mortgage, some banks report some don't, and if they do, it states "mortgage" and monthly payment amount. However, this amount is higher than LOC's interest amount and thus will be worse for your TDS this time. So, I am not sure what to expect beacon score wise if I opt for LOC type of mortgage. Additional thoughts?

Thanks



Dejan

 

[kanabel]

I did actually find an answer when re-reading links you posted. Credit score SHOULD go down with LOC vs mortgage, but according to Rob McDonald even 620 would be sufficient for most mortgages. However, I think I`ll opt mortgage still.

Thank you again

Dejan

 

[HeatherBrandt]

Hi there,

My husband and I have 10 LOCs secured by real estate and 1 unsecured LOC. My credit score is lower than average. I think the last time I checked it was 650. On it`s own, it doesn`t look great. It is due to the LOCs, but we have not been turned down for a mortgage since 2006 (that bank has done 4 refinances since that time and done 2 more deals with us).

I think it`s more looking at the person and the whole portfolio. With the fantastic help from Bonnie Deck of Peter Kinch`s office, we have qualified for 3 mortgages in the last 6 weeks, and this was with not using my income as I am fairly newly self employed.

We have used mortgages on the newest properties, because the rates are good and as a bit of a hedge for the future.

good luck,

 

[kanabel]

QUOTE (HeatherBrandt @ Dec 4 2009, 02:11 PM) Hi there,

My husband and I have 10 LOCs secured by real estate and 1 unsecured LOC. My credit score is lower than average. I think the last time I checked it was 650. On it`s own, it doesn`t look great. It is due to the LOCs, but we have not been turned down for a mortgage since 2006 (that bank has done 4 refinances since that time and done 2 more deals with us).

I think it`s more looking at the person and the whole portfolio. With the fantastic help from Bonnie Deck of Peter Kinch`s office, we have qualified for 3 mortgages in the last 6 weeks, and this was with not using my income as I am fairly newly self employed.

We have used mortgages on the newest properties, because the rates are good and as a bit of a hedge for the future.

good luck,

Thanks for your input Heather. Apparently, LOCs are your favorite.