You’ve got plenty of equity, good credit, and a business that’s doing well. You went to your bank or credit union for a home equity line and got told no, or got offered a fraction of what you asked for. If that’s you, it almost always comes down to one thing, and it isn’t your house. It’s your tax returns.
Short on time? Text me your numbers at 704-890-7168 and I’ll tell you what’s realistic, or jump to the calculator.
A bank HELOC is underwritten off your tax returns, the same way a conventional mortgage is. They take your net income after write-offs, average two years of it, and measure your debts against it. If your CPA did their job, that number is low. So the bank looks at someone with $400,000 in equity who, on paper, makes $60,000 a year, and the answer is no.
In other words, the problem isn’t the equity. It’s the paperwork. And because banks usually keep their equity lines on their own books, they tend to be stricter about this, not looser.
HELOC stands for home equity line of credit. It’s a second loan that sits behind your first mortgage, and it works a lot like a credit card secured by your house. You get approved for a limit, you draw what you need, and you pay interest only on what you’ve actually used.
Most lines have a draw period, when you can pull money out, followed by a repayment period, when the balance pays down. The rate is usually variable and tied to the prime rate, so your payment moves when rates move. On non-QM lines, the draw period is often shorter than what a bank offers, so ask.
And here’s the part that matters most right now: your first mortgage doesn’t change. Same rate, same payment, same payoff date. You’re adding a loan, not replacing one.
Yes. As a broker I have access to non-QM lenders that offer equity lines and fixed second mortgages built for self-employed people. They qualify you a different way:
Credit carries more weight on these programs. A strong score and a clean history open up more options and better pricing. If your business runs through an LLC or its own account, that can work too, as long as the credit and the deposits are there. More on that in no income verification mortgages.
Lenders look at combined loan-to-value, or CLTV. In other words, your first mortgage plus the new line, compared with what the home is worth. On a primary residence, many programs go to 80 or 85% CLTV, and a few go further for stronger files. Rental and investment property lines are tighter.
Quick math. Your home is worth $700,000. At 85% CLTV, total borrowing can be $595,000. You owe $350,000 on the first, so the line could be up to about $245,000.
Try it with your own numbers. The calculator also shows what a full cash-out refinance would cost you instead, because that’s the real comparison, not the bank line you didn’t get.
Local banks and credit unions generally won’t do a line of credit on a rental. Some non-QM lenders will, and some will qualify it off the property rather than your tax returns. I wrote the whole thing up, including an investor who used a line on one rental to buy the house next door: how to get equity out without refinancing.
Yes, and it’s one of the cleaner ways to do it. If you want to buy before you sell, a line on the home you’re in now can cover the down payment on the next one, so you’re not stuck writing an offer that depends on your house selling first. In other words, you get to shop like a buyer who’s already sold. When the old house closes, the line gets paid off. I walk through the other ways to do this in how to buy a house before selling the one you live in.
Two things to plan for. First, the lender on the new house will usually count the payment on your current home and the new line when they qualify you, so the income side has to work, and that’s where bank statement programs earn their keep. Second, most lenders won’t open a line on a house that’s already listed for sale, so set it up before the sign goes in the yard.
These get lumped together, but they’re different tools.
Draw what you need when you need it. Interest only on what you’ve used. Rate usually variable. Good when the amount or the timing is still open.
All the money at closing. Fixed rate, fixed payment, fixed payoff date. Good when you know the number and you want the cost locked in.
One thing to watch: some non-QM products called “HELOCs” fund the full amount at closing and behave more like a fixed second. Neither one is wrong. Just know which one you’re getting. Here’s more on how a second mortgage works.
Non-QM pricing runs higher than a bank line. There’s no way around that. The price moves with two things more than anything else: your credit score and how much of the home you borrow against. Higher score and lower CLTV, better pricing. Some lenders charge an origination fee, some charge an annual fee, and some charge a fee if you close the line in the first few years.
I don’t publish rates on this site because they go stale. Send me your scenario and I’ll get you real numbers for today.
People ask me for a lender name. The honest answer is that the best HELOC is the one you can actually qualify for with the paperwork you have, at a price that fits how long you’ll use the money. So compare these instead:
That’s the shopping I do for you. I line up the non-QM equity programs side by side and tell you which one fits, and which ones to skip.
What the home is worth, what you owe, roughly what your credit looks like, and how you get paid. That’s enough for me to tell you what’s realistic. It takes about twenty minutes, and I’ll tell you if it doesn’t make sense.
Scott Hastings, NMLS #926762
Call or text 704-890-7168
Yes. Banks often decline self-employed HELOCs because they qualify you off tax returns after write-offs. Non-QM lenders offer equity lines and fixed second mortgages that qualify you with bank statements, 1099s, a P&L or assets instead.
Yes. Bank statement HELOC programs use 12 or 24 months of business or personal deposits instead of tax returns. Some lenders verify deposits digitally through Plaid, so no tax returns or pay stubs are needed.
The one that qualifies you with the documents you already have, whether that’s bank statements, 1099s, a P&L or assets, at a combined loan-to-value, draw period and fee structure that fit your plan. A broker can compare several non-QM equity programs at once.
Yes. A line on your current home can fund the down payment on the next one so your offer doesn’t depend on a sale. The new lender usually counts both housing payments when qualifying you, and most lenders won’t open a line on a home that’s already listed for sale.
It depends on the lender and how much you borrow. Non-QM equity programs generally want solid credit, and the best pricing and highest loan amounts go to higher scores. Borrowing against less of your home’s value can open options at lower scores.
No. A HELOC is a separate second loan. Your first mortgage keeps its rate, payment and payoff date.
Lenders cap combined loan-to-value, which is your first mortgage plus the line divided by the home’s value. Many programs allow 80 to 85% on a primary residence and less on investment property. Multiply your home’s value by the limit and subtract what you owe.
Generally yes. It’s your money to use. Whether the interest is deductible depends on how you use it, so check with your CPA.
Most banks and credit unions won’t, but some non-QM lenders will, including programs that qualify off the property. Limits are lower than on a primary residence.
If your first mortgage rate is low, a HELOC usually costs less because it leaves that loan alone. If your rate is high or you owe very little, a cash-out refinance can be cleaner. The calculator on this page compares both.
