...How people get approved today: Let’s assume you’re applying for a new mortgage on a second home, cottage or rental property. Also assume you have a HELOC with a $200,000 limit.
Today, most lenders will make you prove you can afford the payment on the money you owe in that HELOC. If your HELOC has a zero balance, it’s of little consequence to your mortgage application. If you do owe money in your HELOC, most lenders calculate your assumed payment based on:
the HELOC balance owing
the lender’s posted fixed rate (commonly the 5-year posted rate, or 5.34% today), and
a 25-year amortization.
Here’s what’s changing: Take the exact same scenario as above, but now assume the lender makes you prove you can afford a payment based on your HELOC credit limit. Even though you might have a zero balance, the bank assumes you might use all of your available credit. It therefore adds a hypothetical $1,334 a month payment to the debts on your mortgage application.
https://www.ratespy.com/got-a-heloc-you ... k-11067208