HELOC Loans in Miami-Dade County, Florida: Learn About the Benefits and How They Work

To be suitable for a HELOC, you must meet specific standards like other loans. These standards include having a solid credit history and good home ownership.

Here are some things you should be aware of if you're curious about how to apply and qualify for HELOC.

How does a HELOC work?

A HELOC loan typically functions as a piggyback loan or a second loan acquired simultaneously as the original mortgage to fund one property. Usually, it is utilized to reduce the upfront costs of a mortgage, such as private mortgage insurance or a down payment.

For instance, if you want to purchase a home with a loan, most lenders are only willing to cover up to 80% of the home's price, meaning you'll have to produce the remaining 20% as a down payment. But in most cases, it's difficult to scrape up that much cash without depleting one's savings, especially during skyrocketing home prices.

With a HELOC, you seek a 2nd loan, usually around 10% of the home's price. That means, rather than paying the complete 20% down payment, you'll only need to provide 10% in cash, and the HELOC loan takes care of the rest.

Most lenders allow access to HELOC funds in various ways, including internet transfers, checks, and credit cards linked to your account.

Unlike credit cards, this line of credit typically has a draw time and a repayment period.

The phases of HELOC

During the HELOC draw window, usually 10–15 years, you can pull as much funding as you want, up to your established credit limit, but you must make interest-only payments.

After the draw period ends, you will no longer be allowed to take out funds and must now repay the borrowed funds plus interest. You'll make recurring principal and interest payments for 10–20 years until the loan balance is gone. This means you'll be paying more than you did during the draw period.

Additionally, your HELOC may have up-front fees like registration fees, administration fees, and early closure or cancelation fees.

However, compared to unsecured borrowing options like credit cards, you'll pay less in financing costs for an equivalent loan amount. However, it's wise to find out everything up front by inquiring with your lender about additional charges on your HELOC.

That said, a HELOC is secured by the equity in your home and typically has cheaper interest rates than other popular types of 2nd mortgages. Additionally, the interest may be deductible from taxes, allowing you to lower your taxable income.

HELOC Requirements in Miami-Dade County, Florida

Different lenders have different requirements for a home equity line of credit. However, the basics are just the same. Here's a look at the requirements:

Home Equity

All HELOC loans are based on the equity you have in your home, i.e., the percentage of the home's value you control vis-a-vis what the primary mortgage lender controls. To estimate the equity you have in your home, get its current value and mortgage balance. Next, divide the latter by the former. Most lenders require you to have 15 to 20% equity in your home.

But equity doesn't determine how much you can borrow. Lenders usually look at the loan-to-value ratio (i.e., mortgage balance/house's current value) to establish a credit limit.

CLTV

CLTV is short for combined loan-to-value ratio and is a measure of all debts on the property vis-a-vis its value. Usually, the CLTV must not exceed 85%, though some lenders approve HELOCs for homeowners with CLTVs up to 90%.

Good Credit

Of course, your credit history and score will have an impact. Credit scores measure how risky you are. Most lenders require FICOs in the 620 to 660 range, though a higher score will benefit you even more. Generally, lower scores are treated to higher-interest HELOCs and vice versa.

Sufficient Income

Lenders will also examine your income to ensure you can afford the loan's monthly payments. So, you'll need to produce documents proving your income. These include:

• Pay stubs and W-2.

• Federal Tax Returns.

• Social Security benefits verification letter.

• 1099 forms, retirement award letters, among other income and benefits forms.

Strong Debt Payment History

Since a HELOC is a second mortgage, lenders will want to review your debt payment history to ensure that you can consistently make your payments.

Low DTI

Most lenders prefer a DTI between 43 and 50 percent. Of course, your DTI is the ratio of your outstanding monthly debts to your income and measures whether you can afford to take on additional debt obligations.

The 75-15 HELOC for Condos in Miami-Dade County, Florida

Many folks relocating from other states to Florida are buying condos. Many of these folks have already been pre-approved for mortgages where they come from. But they don't know that Florida operates by different rules when it comes to conventional financing for condos.

Indeed, there are three reviews for condo purchases in Florida - full, limited, and PERS. In total reviews, the building's complete financial picture is examined. In limited reviews, the financial components aren't always examined as thoroughly. Of course, in every situation, a lender may decide not to offer a loan if they discover too many problems with a condo.

A Limited Condominium Review is much simpler to complete than a Full Condominium Review. With limited reviews:

• Lenders are not permitted to review the condo association budget. That means they can't scrutinize what percentages are allocated to reserves.

• Lenders don't need verification of fidelity bond coverage when examining condo insurance.

• The ratio of buyers to owner-occupied properties is irrelevant.

• The condo questionnaire is brief, so you won't have to spend much time on it.

A limited review expedites and simplifies the condo approval process. It permits up to 75% primary mortgage financing and 90% overall financing on the first and second mortgages for the primary home. This is useful because condo mortgage rates increase when the LTV exceeds 75%. You can avoid incurring a higher rate by keeping the size of your first lien below 75% and letting HELOC take care of the remaining 15%.

The Benefits of a HELOC in Miami-Dade County, Florida

HELOCs are among the most widely available low-cost financing alternatives. These loans are collateralized on the equity value the borrower has in their home and are advantageous in the following ways:

Lower interest rates

HELOCs usually have lower interest rates compared to unsecured lines of credit. As of August 2022, the cost of borrowing $30000 varies as follows:

• HELOC - 6.5% (average interest)

• Credit cards - 15.13% average APR)

• Personal loan - 8.73% (average interest rate)

Of course, the rate you get will depend on your credit profile, among other factors.

Also, although HELOC rates may fluctuate over time since they are variable-rate solutions, they often remain lower than those of other lines of credit.

The possibility of a rate lock

Some lenders provide the choice to fix or lock in the interest rate on the remaining balance so that you won't be subject to changing interest rates once you've accumulated a balance.

Even though this choice is rare and can result in additional costs or a steeper starting interest rate, it gives borrowers more security in a skyrocketing rate climate similar to what we're experiencing now.

That said, shop around and compare the loan costs (including upfront fees and closing costs) from various lenders before deciding.

Pay only what you spend

With a HELOC, you withdraw the money you need ( up to the set credit line limit) while avoiding having to incur interest on any funds you do not utilize.

You must return what you drew from your HELOC with interest, just like credit cards. This is cheaper than other home equity financing solutions where you'd be required to borrow and repay the full loan amount whether you use it or not.

Use the funds for whatever you like

You can use the HELOC money however you see fit. Typical applications include consolidating debt, launching a business, settling medical bills, or funding home upgrades. It has several advantages, including:

• Little to zero closing costs.

• Interest is tax deductible.

• Flexibility when it comes to borrowing and returning money.

• Increases/improve home value.

• More lenient underwriting standards.

• Unlike a remodeling loan, it is based on present worth rather than future value.

Promotional offers

Most HELOC lenders provide promotional deals like waived expenses or reduced interest rates for a limited time to entice customers.

When selecting a HELOC lender, you shouldn't base your decision on the existence of special offers; nonetheless, taking advantage of these deals can help you save a little money upfront. Before choosing a lender, consult with many lenders and compare offers (including fees and rates).

Larger loan amount

HELOC loans tend to be bigger than unsecured lines of credit. Of course, your HELOC borrowing limit will depend on the equity you've accumulated in the home.

Most lenders demand an 80% or less LTV, meaning all debts secured against the home must be less than 80% of its value. The actual borrowing limitations may vary from lender to lender and depend on your income and credit profile.

Great for Divorcees

Divorce is unpleasant in various ways, and determining how to compensate your spouse for their equity value in your home makes things even more stressful. If you have a flexible mortgage rate, you're likely paying it at 2 to 3 percent.

If you decide to sell the home, settle things with your ex, and buy back a new home, you'll likely end up with a 5 to 6 percent mortgage. And even if you choose not to sell but refinance instead, the picture is the same.

In this situation, a 2nd mortgage in the form of a HELOC is advantageous in the following ways:

• It keeps the 1st mortgage intact.

• You may use up to 100% of the current value of your house to offset divorce settlement payments.

• It helps avoid having to refinance and maybe losing the first mortgage's cheaper interest rate.

• Option to fix or lock in interest rate.

• It helps you avoid the costs and commissions associated with selling.

HELOC vs. Cash-Out Refinancing

A HELOC isn't the only way to utilize the equity you have in your home for some extra dough. A cash-out refinance is another option. Here you replace your existing mortgage with an entirely new loan.

Depending on the difference between your new loan and the outstanding balance on the previous one, you may be able to pocket some cash out of the deal. You can use the cash for home improvements, debt consolidation, medical bills, etc.

Refinancing has certain advantages over a HELOC. Generally, if current mortgage rates are lower than what you are paying, you'll want to make the switch.

However, because you're getting a new primary mortgage, expect higher closing costs than with HELOCs, which usually don't involve steep upfront expenses. Additionally, if you refinance and your home's equity falls below 20%, you may be required to start paying private mortgage insurance. However, PMI is often dropped when you regain 20% equity in the home.

Applying for a HELOC in Miami-Dade County, Florida

Start by comparing lenders. Don't be distracted by promotional offers. That doesn't mean you shouldn't take advantage of them when offered. Remember to keep the overall loan cost (fees + interest) in mind when deciding.

Next, if you qualify, prepare your documents and complete any necessary applications. While some mainstream credit unions and banks may require a trip to the local branch, most lenders offer an alternative online application process.

Get your house appraised. The bank will often request an evaluation to determine the current value of your home. Most of the time, the lender will arrange a house appraisal, but you should be ready to foot the $300-$400 appraisal charge for a single-family property.

Get ready to close the deal. If your HELOC request is approved, your bank will inform you of the interest rate and credit limit. If you choose to proceed, you must sign the loan agreement. Any closing fees will be rolled into the total loan amount.

Get your money. You'll have up to 3-week days to reconsider and cancel the loan if you want. After that, you can draw money from your HELOC whenever you like.

What Is the Wait Time for a HELOC?

The HELOC application and closing steps usually take 2-4 weeks. But depending on your bank and the difficulty of your application, it could also take up to 6 weeks.

Is Miami-Dade County, Florida a great place to live?

Are you considering relocating to Miami? That is wonderful! This county, on Florida's Gold Coast, is the third largest in the state, with slightly under 2.5 million residents. It blends densely populated cities with agricultural land.

Three national parks that provide a tranquil refuge from the bustling Miami city are located within the county's borders - Biscayne National Park, Big Cypress National Preserve, and Everglades National Park.

Numerous prestigious colleges and universities in Florida are located here as well. There are many domestic and foreign businesses, ranging from healthcare to finance, but transportation and tourism are the two primary local sectors.

Generally, the county is a great place to live due to the abundance of work and employment opportunities, safe neighborhoods; top-notch schools; high-quality roads and infrastructure; accessibility to green space; parks, recreation, arts, culture, clean water, and air.

Of course, you'll need survival strategies for the legendary South Florida heat. Here are the top 5 places to get ice cream and froyo in the county when the weather gets hot.

Aubi & Ramsa

This Miami bar, at 172 NE 41st St., serves frozen drinks mixed with various alcoholic beverages, including red wine, din, vodka, rose, and tequila. Adults above age 21 are welcome.

Bianco Gelato

Bianco Gelato is a family-owned gelato joint at 9700 Collins Ave., Bal Harbor. Visit it for some low-fat ice cream flavors.

Cry Baby Creamery

Visit the creamery at 17389 South. Dixie Highway, Palmetto Bay, for a popsicle beer float, ice cream stuffed tacos, and ice cream rolls in the shape of a croqueta.

Azucar Ice Cream Company

This store, in the center of Little Havana, offers frozen treats with a Cuban flavor. You'll enjoy flavors like plátano maduro, café con leche, and guarapia (pineapple and sugarcane).

The Frieze Ice Cream Factory

There are dozens of sorbet varieties at The Frieze in Miami Beach, 1626 Michigan Avenue, like the "Get Down Boogie-Oogie Cookie" and the "Sassy Strawberry," which are crafted with alluring fruits like passion fruit and melons and are sour but not overly tangy. Request champagne sorbet, which is a crowd pleaser. You are surely going to enjoy it.

Is HELOC loan a wise idea?

Unsure as to whether a piggyback loan is the best decision? Well, a HELOC loan is the best option in the following scenarios:

• If you don't have enough money for a down payment, you don't have to save for many years to buy a home. You can use a HELOC loan to top up your down payment and sign the contract for your dream home sooner.

• Piggyback mortgages often enable homeowners to purchase larger, more recently updated, or better-situated homes than they could with a typical mortgage loan, so they are a good option if you desire a larger home for less money. Also, if the home is projected to accumulate equity quickly, this financial decision is the best move.

• If you need to utilize the equity you have in your home to access cash for repairs, medical bills, divorce settlement, etc.

• If you have 10% of the down payment, stable employment and income (tax records, w-2 forms), and 43% or less DTI.

As previously mentioned, there are several alternatives to a HELOC loan. Your financial situation and the cost of homes in your neighborhood will probably determine whether you choose a piggyback loan or another option. To determine the most advantageous loan choice for your case, consult with a loan officer and have them compute the figures.