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I am applying for a $250,000 home equity line of credit with a 30 year term but I got approved for only $200,000 at 4% because they are using a payment of 15 years instead of 30.Here is their explanation:"The $969.53 is a minimum payment due that would be based on using the full $200,000.000. This is mostly interest, and the principle is amortized over 30 years on this. The $1447.00 qualified amortized payment is a payment based on paying this back in full in and the principle is calculated roughly based on a 15 year amortization. The 969.00 is a lower payment but it is also covering a lot less of the principle, so we can’t use this for our debt to income ratio."What is this $1447 payment? I've done this calculation over and over using multiple online calculators and the $969.53 payment is enough to cover both principle and interest over the 30 year life of the line of credit.I'm really confused and looking for some advice here before I head off to another bank.Thanks

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rated:
So you want a 30 year HELOC with a variable rate ?
 

rated:
Yes, this is what I applied for.

rated:
200k @4% APR amortized over 15 years = $1479/month
200k @4% APR amortized over 30 years = $955/month

Based on what you wrote, I believe your minimum require payment is calculated based on a 30 year amortization.
However, for the purpose of qualifying you (debt-to-income ratio), they will use the 15 year amortization payment.

Hence, you qualified only for a 200k loan based on the ~$14xx monthly payment and your corresponding DTI ratio.

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[deleted]

rated:
fwuser12 said:   200k @4% APR amortized over 15 years = $1479/month
200k @4% APR amortized over 30 years = $955/month

Based on what you wrote, I believe your minimum require payment is calculated based on a 30 year amortization.
However, for the purpose of qualifying you (debt-to-income ratio), they will use the 15 year amortization payment.

Hence, you qualified only for a 200k loan based on the ~$14xx monthly payment and your corresponding DTI ratio.

  But why would they use a 15 year amortization payment to qualify me? Where does the 15 year number even come from?

rated:
You probably can draw from the HELOC during the first 15 years, and they assume that you will have it maxed out at the end of that draw period.
Then you have only 15 years left to pay it off.

Which reminds me. I have a small HELOC that I got over ten years ago, and the draw period expired a few years back, and I think it was 20 years or less.
I think there may be a balloon payment coming up some time soon! Your posting was a timely reminder to check into the details of this!!!

Now the banks are smarter.. to protect you!

rated:
PaulBanks said:   
fwuser12 said:   200k @4% APR amortized over 15 years = $1479/month
200k @4% APR amortized over 30 years = $955/month

Based on what you wrote, I believe your minimum require payment is calculated based on a 30 year amortization.
However, for the purpose of qualifying you (debt-to-income ratio), they will use the 15 year amortization payment.

Hence, you qualified only for a 200k loan based on the ~$14xx monthly payment and your corresponding DTI ratio.

  But why would they use a 15 year amortization payment to qualify me? Where does the 15 year number even come from?

  
Dodd-Frank and the CFPB

They are required to calculate the qualifying payment on HELOCs and interest only loans using the period during which the loan is amortized. Sounds like you have a 15 year draw period (during which you only pay interest on the balance you've drawn) and a 15 year repayment period (during which you can no longer draw and your payments increase to cover principal and interest.)

 

rated:
I applied for a 30 year loan with a 10 year draw and a 20 year repayment with the payments fully amortized during both periods, so no interest only at any point.

rated:
Put this in excel:

=PMT(InterestRate/12,Term*12,LoanAmt)

You can then change the interest rate, term, and loan amount to see your monthly payment. You can also assign the variables to different cells to play around with.

rated:
Make sure interest rate is converted to decimal value or use 'InterestRate/1200' in PMT formula. In other words, use this formular with % interest rate

=PMT(InterestRate/1200,Term*12,LoanAmt)

thanks S197, formula worked great.

rated:
PaulBanks said:   
fwuser12 said:   200k @4% APR amortized over 15 years = $1479/month
200k @4% APR amortized over 30 years = $955/month

Based on what you wrote, I believe your minimum require payment is calculated based on a 30 year amortization.
However, for the purpose of qualifying you (debt-to-income ratio), they will use the 15 year amortization payment.

Hence, you qualified only for a 200k loan based on the ~$14xx monthly payment and your corresponding DTI ratio.

  But why would they use a 15 year amortization payment to qualify me? Where does the 15 year number even come from?

  That's their policy.

rated:
PaulBanks said:   I applied for a 30 year loan with a 10 year draw and a 20 year repayment with the payments fully amortized during both periods, so no interest only at any point.
  Probably doesn't have to do with their decision, but all HELOCs are interest only during the draw period...

I worked at a credit union that offered HELOCS with a 1% minimum payment or an IO payment at .25% higher rate because it's IO (both only during the draw period, then it would amortize after the draw). People paid the higher rate for the IO loan when they could have just made the 1% payment and advanced the remaining line each month.

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