A HELOC refinance is similar to taking out the first mortgage. The qualification is based on income, expenses, debts, and assets.
Documents like pay stubs, W-2 forms, tax returns, mortgage statements, photo ID, proof of insurance, and other documents which the loan underwriter wants should be provided.
A borrower should have a FICO score of “very good” to “exceptional” ie. 740-850 to get the lowest interest rates.
A lows score will attract a higher interest rate and also will have a harder time finding a lender to work with.
A borrower needs to have enough equity in their home after taking out the new loan which meets the lender’s guidelines for the combined loan to value (CLTV) ratio.
When the total amount borrowed is divided by the property value this calculation in a percentage form is the CLTV ratio.
The homeowners having excellent credit are provided with an option to borrow up to 100% of the value of their home by some lenders, but commonly one can borrow only 80% to 90%.
If a borrower only wants to refinance the existing HELOC balance and not more, then he should be able to find a lender who will work with him.
The more equity a lender has, the lower his interest rate would be.