Benefits of a Home Equity Line of Credit in a Purchase

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.

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I hope you enjoyed reading this article. It's my goal to keep you updated with the latest real estate mortgage news. I'm proud to provide you with 100% original and unique content. Subscribe now to get high quality real estate mortgage content and articles delivered directly to your inbox. Chad Baker is Regional Manager for LendUS. Chad is consistently recognized in the top 1% of mortgage originators in the United States 2011-2017. Got a question for Chad? Call (858) 353-8331 or submit your question online