# HELOC denied due to high debt ratio



## SpendLessEarnMore (Aug 7, 2013)

Just got back from TD. Everything was going well. Good credit so they offered me prime +0.65. Than when the computer spit out my debt ratio it was too high at 61%!

I'm just asking for a $50k loan on a $350k house with $179k mortgage remaining.

My total assets is about $185k and I have $25k cash in the bank. Monthly income is about $7200 and I can't qualify to make $200/mth payments????

Seems the problem is owning multiple houses and rental income is considered 50% monthly income.

Since my HSBC rep is on 2 weeks vacation meanwhile is there any other banks that have a higher chance approving me for a HELOC on a rental property? Or takes assets and credit score into consideration if debt ratio does not fall into their range?

Or any other avenue to pursue getting a $50k loan for under 4%? Go with a mortgage broker?


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## Chris L (Nov 16, 2011)

That surprises me!


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## MrMatt (Dec 21, 2011)

What other debts do you have? Car loan, current CC balance etc.

What is the total of currently available credit, all LOC, Credit cards, store cards etc, including any loans you cosigned for?

I'd bet the answer is in there.


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## the-royal-mail (Dec 11, 2009)

There are some rather vocal individuals in CMF who feel that relying on LOC is sufficient for an emergency. I guess the OP has dispelled that myth lol.


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## andrewf (Mar 1, 2010)

the-royal-mail said:


> There are some rather vocal individuals in CMF who feel that relying on LOC is sufficient for an emergency. I guess the OP has dispelled that myth lol.


TRM, not everyone who said that is leveraged to the gills on real estate like OP.


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## doctrine (Sep 30, 2011)

> I guess the OP has dispelled that myth lol.


To be fair, he didn't get one. It would be a much different situation if an existing LOC, which was for 'emergencies', was pulled by the bank, which is not the case here.

It sounds like the OP has other debts that are not part of the equation above. What other rental properties do you have, what income do you get and how much equity/mortgage do you have out on them? That is part of your total debt service ratio.


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## MrMatt (Dec 21, 2011)

SpendLessEarnMore said:


> a HELOC on a rental property?


No, a rental property isn't your Home.


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## OhGreatGuru (May 24, 2009)

Thanks to MrMatt for catching the essential detail.
_*Investopedia:
Definition of 'Home Equity Line Of Credit - HELOC'
A line of credit extended to a homeowner that uses the borrower's home as collateral.*_

A rental property ain't your home. It's a business investment, and borrowing on it is always considered riskier in the financial business.


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## sags (May 15, 2010)

It sounds like the issue here is the income to debt ratio...........and that the bank will only consider 50% of rental income as personal income.

For those whose income is comprised of pensions............the bank doesn't consider any of it as income.

I believe income from a portfolio falls into the same category.

Banks don't consider anything that is creditor proof as income.


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## SpendLessEarnMore (Aug 7, 2013)

The only things I owe is the 2 mortgages and no to co-signing. Yes I know I'm highly leverage and don't make a whole lot of money. My working income is $50k and I get $3000/mth from my 2 rental properties. I don't owe anything else. My credit card is $0 with a limit of $15k. I don't even have a LOC but my jobless friend on EI/welfare for last 6 years has one. I don't have car payments, or any other loans. In fact I've accelerated my mortgage payments last 3 years to paying $400 extra per month which also hurts my debt ratio. 

I was planning on using the HELOC to invest in dividends that would yield in total 4% or greater and grow it from there. 

I told the bank my purpose for the heloc and they know it's a rental house because I gave them the 2 2-year lease agreements on each rental property and 2 years worth of rental income tax statements.

Yes you can use a rental house as collateral for a HELOC. Many banks do it so I don't understand the statement a rental property isn't your Home. They just put the HELOC in 2nd position no matter if the house is principal or rental. According to TD you can only get LTV of 65% if using a rental house. TD was great in trying to get me the HELOC but they have to go with what the computer spit out which was 61% debt ratio. They even try to fudge the numbers a bit but only managed to get it down to 51%.

Anyways I'll wait for the HSBC guy to get back from his vacation since he said my debt ratio was excellent. Or if anyone has any suggestions how I can get an investment loan for under 4% I would be totally indebt to you.


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## andrewf (Mar 1, 2010)

SpendLessEarnMore said:


> TD was great in trying to get me the HELOC but they have to go with what the computer spit out which was 61% debt ratio. They even try to fudge the numbers a bit but only managed to get it down to 51%.


Speaks to how widespread 'soft fraud' is.


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## Just a Guy (Mar 27, 2012)

Actually it seems to me that we are back in the phase of the cycle where the banks have a ton of cheap money which they won't lend out again. Think the USA right after the Feds bailed them out with the understanding that they should loan out the money to the consumer, which they never did. 

Eventually though the banks get greedy and will loan out money to anyone with a pulse...though even the lack of a pulse may be worked around.


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## Cal (Jun 17, 2009)

What % would they be more comfortable with you at before lending more to you?

I also find it ironic, as TD had informed me semi recently that the more I borrowed from them, the greater my chance would be to get my HELOC at prime.


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## SpendLessEarnMore (Aug 7, 2013)

Don't know TD never mentioned any %. I found from my experience dealing with TD they make stuff up to get you to sign products with them.

Anyways I went to ATB today and one look at my financial statement they approved me on the spot. They even offered me 2.6% on 5-year variable mortgage but I would pay the prepayment penalty to switch over to them. They offered $12k HELOC at 2.6% and $40k LOC at prime+0.5 if I moved my chequing and savings over to them. My credit score was 780 after 3 recent credit checks for a HELOC.

All I had to say was yes and I would have a HELOC right now but I told them I need to think it over. So now to crunch some numbers and see if it's profitable to move over to them.


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## marina628 (Dec 14, 2010)

SpendLessEarnMore said:


> Don't know TD never mentioned any %. I found from my experience dealing with TD they make stuff up to get you to sign products with them.
> 
> Anyways I went to ATB today and one look at my financial statement they approved me on the spot. They even offered me 2.6% on 5-year variable mortgage but I would pay the prepayment penalty to switch over to them. They offered $12k HELOC at 2.6% and $40k LOC at prime+0.5 if I moved my chequing and savings over to them. My credit score was 780 after 3 recent credit checks for a HELOC.
> 
> All I had to say was yes and I would have a HELOC right now but I told them I need to think it over. So now to crunch some numbers and see if it's profitable to move over to them.


Here is a couple ideas that may help you .Put the mortgages back to the minimum you are required to pay and have them rework the numbers , they assume you have maxed all credit cards in their calculations.You could lower your credit card limit and then see where that takes you.


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## SpendLessEarnMore (Aug 7, 2013)

marina628 said:


> Here is a couple ideas that may help you .Put the mortgages back to the minimum you are required to pay and have them rework the numbers , they assume you have maxed all credit cards in their calculations.You could lower your credit card limit and then see where that takes you.


ah I forgot about the credit card. Thanks!

I punched in the numbers myself and couldn't figure how they got 61%.

My gross monthly is $5700 (50% rental). My loans are 2 mortgages at $1645 ($820+$825). Property taxes total is $300. Utilites is $200. 

So 2145/5700 is 37.6%. Unless I got $1332/mth of debts somewhere maybe it's the 15k credit card that I owe nothing on.

Maybe I should go to another TD branch and ask for a second opinion on doing my debt ratio.


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