Personal Finance

HELOC CL Based on Original or Current Property Value?

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  • May 10th, 2021 11:38 am
[OP]
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May 8, 2009
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HELOC CL Based on Original or Current Property Value?

Sorry total n00b question here.

Been glancing at this...

Still don't know exactly how it works.

When someone gets a HELOC, is their CL based on property value when they bought the property, or the current value? Also does the property still financed through a mortgage or not have any impact?
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Jan 19, 2017
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titaniumtux wrote: Sorry total n00b question here.

Been glancing at this...

Still don't know exactly how it works.

When someone gets a HELOC, is their CL based on property value when they bought the property, or the current value? Also does the property still financed through a mortgage or not have any impact?
It s/b the current market price. If the market price has dropped from your purchase price, nobody is going to lend more than your current value. Existing mortgage will affect how much you can borrow from HELOC.
[OP]
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ml88888888 wrote: It s/b the current market price. If the market price has dropped from your purchase price, nobody is going to lend more than your current value. Existing mortgage will affect how much you can borrow from HELOC.
Also if market price goes up, does the CL increase automatically?
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titaniumtux wrote: Also if market price goes up, does the CL increase automatically?
the amt you are allowed to borrow is determined at the time you apply to get the HELOC. I have never heard of the limit will be increased automatically after that if the market value increases. You usually have to reply again for a higher limit.
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Dec 13, 2010
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titaniumtux wrote: Also if market price goes up, does the CL increase automatically?
You can definitely get readvanceable HELOC's, in which your credit limit increases each month as you pay down your mortgage principal. Often (but not always), the lenders that give you these products set the initial collateral charge against your property for higher than the assessed value (e.g. 120%) - which allows for property value increases over time to give you more HELOC room. You must qualify by income levels still, since the HELOC counts as available borrowing.

Keep in mind that the HELOC revolving portion can never be more than 65% of your home's value, and you cannot borrow in total more than 80% (mortgage + HELOC). If many years go by and you want to access the increased value of your property, you can go back to your bank to have it reassessed, and the collateral charge on your property adjusted. You will have to pay for the legal/appraisal fees though, so it's not worth doing every year.
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Oct 27, 2012
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Think of it this way - a HELOC's limit is basically based on a snapshot of when you applied/last applied to have an increase when an appraisal would have been done, up to 65% of the property value. It will not be automatically increased based on market value, which would require an appraisal to determine.

What some banks do is set a collateral charge for more than 100% of the appraised value at the time you were given the mortgage/HELOC. My understanding is in that scenario, you could ask the bank to increase it with only appraisal fees (no legal), subject to the 65% limit on current market value.
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Dec 12, 2009
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titaniumtux wrote: When someone gets a HELOC, is their CL based on property value when they bought the property, or the current value? Also does the property still financed through a mortgage or not have any impact?
We got our HELOC during a mortgage renewal, which saved on a bunch of fees. At the time, the property value was much greater than when we initially bought.
We had no desire for a large HELOC at the time, so rather than pay for a property assessment the bank was OK with using the current MPAC assessment.
During the renewal, we switched to a readvanceable mortgage where our remaining mortgage + HELOC was below the MPAC assessment.
That amount was below the banks maximum allowable.

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