Can you get an equity line on a home you are going to buy to use as part of the financing for that same home?
by Mortgage Rates on Saturday, October 2nd, 2010 | 2 Comments
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This is illegal, but I don’t think you have all the facts straight. For one, the appraised value and the purchase price are occasionally very different. In addition I question whether or not the second loan was a HELOC or simply a second mortgage, often done to avoid paying private mortgage insurance which is legal. Break out the closing documents on the purchase and double check.
It isn’t illegal if it is done simultaneously but the logic behind borrowing with a maxed out heloc doesn’t make any sense unless the heloc interest rate was lower than a conventional second ARM. Banks are highly regulated, even before market crash. Often the best place to start is with your state’s attorney general. I agree it does sound predatory due to the lack of logic.
You got a first and a second mortgage which equaled $ 270,000 for a house which appraised for $ 285,000? As bad as it sounds but if you credit checked out and you made enough money to make the monthly payments – it is unfortunately a legal practice banks did mainly in the years of the real estate boom in 2004 and 2005. This is one of the reason so many home owners went under. Today the banks are very careful with loans like this and very rarely we see those second mortgages anymore.