HELOC denied cuz of high dti ratio

amother

OP ↓

Yesterday at 6:00 pm

We want to pay off our credit cards using our home equity but we were denied because of all our credit card debt. Any way to get them to take into account that we'll be using this money to pay off our debt and not to add to it? Any other advice?

amother

Lotus

Yesterday at 6:06 pm

We were able to do that through citizens recently. They were the only ones willing to do it.

agreer

Yesterday at 6:06 pm

You can try writing a letter of explanation to the bank.

The problem is that you can say you'll do that and then once you get the money, buy a boat instead. How do they know you'll actually do that?

amother

Nutmeg

Yesterday at 6:14 pm

I would explain the purpose of the loan and maybe suggest that they send the money directly to the credit card issuers themselves, so they know where the money is going and can guarantee it’s serving it’s purpose

But they might still deny it. Especially because that debt will still exist (to them instead of credit card) and now all your cards are free to spend on and rack up more debt if you choose to

amother

Kiwi

Yesterday at 6:34 pm

A traditional mortgage allows you to do exactly that, if thats an option for you. Helocs are trickier with qualification. Would you have someone that could lend you the money to pay down the cc debt allowing you to qualify?

amother

Lavender

Today at 9:07 am

Which bank did you apply with? If the cc debt is being paid off @ closing with the proceeds the payments should not be included in the DTI calculation. With HELOCs you need to be assertive and don't back off.

amother

Seablue

Today at 9:40 am

II is not very wise decision to take out a HELOC to pay credit cards.

Credit card debt is unsecured which means there is nothing the credit card company can do if you don't pay except tarnish your credit. Yes they can put it in collections or get a judgment.

A HELOC is secured by your house. If you don't pay for any reason the Bank will foreclose and you will lose your home.

As for the Bank, using your HELOC to pay off your credit cards is actually not something that makes you more "attractive" since you will now have credit cards that you can charge up again.

You have indicated that your use of credit is out of control as you probably have multiple cards and your actual usage of cards is high. For example, if your credit limit for all my cards is $100,000 and you owe $90,000 then you are utilizing 90% of your available credit. Someone who is a good credit risk to a bank might be using less than 10% of available credit with no late payments for the past 7 years.

Meaning no judgment but if your finances are such that you have such significant credit card debt how are you going to pay your mortgage, the HELOC and avoid running up your credit cards again to pay for your life.

What you should do is get your budget in control by being completely ruthless and use the payments you would theoretically be paying to HELOC to pay off your credit cards.

There are various strategies for doing so like paying off the lowest balance so you have a feeling of accomplishment or you can pay off the highest interest card.

But the long term is figuring out how to pay for your life.

amother

↑ OP ↓

Today at 10:08 am

amother Seablue wrote:

Our debt is due to a few years of unemployment and massive unexpected medical/home repair expenses. Right now we are earning enough to pay off our debt reasonably quickly but it'll still take a couple years and the interest on the credit cards is huge. Our estimated HELOC payments are lower than our minimum payments on our credit cards. Our long term strategy is fine bh.

So far our credit card debt is all transferred to 0% account but in a few months it'll start charging interest so instead of finding another good offer to transfer it to I'd love to use our home equity.

I appreciate the concern but it is important to realize that not all credit card debt comes from being irresponsible. We have always been on top of our finances including investing and saving. Hashem gave us a challenging few years. It happens.

amother

↑ OP

Today at 10:08 am

Thank you for all of your responses. We'll try all of it. I'm feeling hopeful.

queene

Today at 10:56 am

I just closed a few days ago with Fulton Bank to do exactly this. Take a Heloc to pay off credit cards. Which made sense for us as we have a plan to pay it back and would rather pay 8% interest to fulton than 18% to the credit card. They allowed it on condition that they themselves make the payments to the credit cards straight from closing..