Does anyone have experience with a private/traditional HELOC?

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January 15, 2024

by a searcher in Boca Raton, FL, USA

  1. Has anyone navigated the SBA loan process with an existing mortgage and HELOC?
    a) I'm interested in whether this adds complexity. Is it necessary to ensure your salary, excluding distributions/bonuses, aligns with a specific personal DTI ratio? Are there any limits to what the SBA views as reasonable? I would expect this to be between $200-$300k to create a DTI below 49%.

    2) I’m exploring the concept of a private HELOC arrangement with a family member instead of a bank. The goal would be a better result for both parties, offering a higher secured interest rate for them and a lower rate for me. My objective is to secure a backup alternative source of liquidity in addition to a revolver for growth opportunities or short-term financial needs. This private HELOC would be formalized legally, including attorney involvement and recording the lien (I understand this generally costs more than traditional underwriting fees but the b/e is short).

    Thanks for any feedback
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Reply by a searcher
from Southern Methodist University in Dallas, TX, USA
There are two concerns - 1) are you using heloc funds as equity injection ? If you are then some lenders want to see another form of income (spouse, investments,etc) that throw off enough cash flow to cover the monthly HELOC payment. In theory this would apply for private or public HELOC. 2) the lender will add the HELOC payment to your overall debt coverage for personal expenses and want you to model a salary that covers that.
commentor profile
Reply by a searcher
in Boca Raton, FL, USA
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