> Because it increases the risk of default.
For who? Banks don’t hold mortgages on their books, they sell them to investors. I don’t think you understand how modern finance works.
For who? Banks don’t hold mortgages on their books, they sell them to investors. I don’t think you understand how modern finance works.
I am not a financial expert, but I have been told by professionals, and read in credible publications, that financing entities are not thrilled about the idea that people can effectively 100% finance additional home purchases using HELOCs, rather than having a cash downpayment.
That's the point I was making. My apologies for drawing an incorrect conclusion on the unrelated details.
This puts the "bank" (read: bank and the investors the bank sold the loans to) in a precarious position, as a slight downturn in the market could result in a large percentage of loans defaulting.