Home Equity Lines of Credit (HELOC) is a great tool to maximize your purchasing power if you are putting down less than 20% down on a home and a great alternative to mortgage insurance.
In San Diego County, a loan amount that is in excess of $417,000.00 is considered a high balance loan and a loan amount that is in excess of $546,250.00 is considered a Jumbo loan. The minimum down payment required for a high balance loan is 10%. The benefit of putting down less than 20% is that you get to hang on to more of your savings, but the drawback is mortgage insurance. Additionally, if your net household income is in excess of $100,000.00 a year, your mortgage insurance payment in NOT tax deductible. The Interest that you pay on a Home Equity Line of Credit (that was used to purchase a property) however, is 100% tax deductible. In many cases the minimum payment of a HELOC is less than that of the monthly mortgage insurance.
Most mortgage banks require a minimum down payment of 20% for any loan amount that exceeds $546,250.00. This puts your maximum purchase price at approximately $682,000.00 with a minimum down-payment of $136,250.00.
Used effectively as a “Jumbo Buster” a HELOC will allow you to purchase up to $830,000.00 with a minimum down-payment of 10%, or $83,000.00
A HELOC is a great alternative to mortgage insurance and can allow a buyer to purchase more home with less money down.
