Author Topic: Home Equity Line of Credit & Other Financing  (Read 293 times)

maz_phil

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Home Equity Line of Credit & Other Financing
« on: November 29, 2018, 11:22:49 AM »
Hello Mustachians,

I have a rental property in Virginia that I paid cash for. Purchased for around $60k and has not been formally appraised but zillow and other websites value the home at around $75k (I understand this is not a viable metric for a loan officer). I need to do about $35k-$40k in improvements and I would like to take out a Home Equity Line of Credit (HELOC) on the property. However, I am finding that it is very difficult to find a lender for this sort of loan when it is not your primary residence. Do any of you have experience with this sort of topic? I would appreciate any advice you have with regards to additional financing options or potential lenders. Looking forward to hearing from some of you.

Kindly,
Maz_Phil

waltworks

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Re: Home Equity Line of Credit & Other Financing
« Reply #1 on: November 29, 2018, 12:48:26 PM »
HELOCs on rentals are almost unheard of. What you want to do is just mortgage the property. You might run into problems finding a mortgage under $50k but local lenders (ie, local credit union) will often do them. Go talk to a mortgage person locally and see what they can do.

-W

sammybiker

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Re: Home Equity Line of Credit & Other Financing
« Reply #2 on: November 29, 2018, 01:12:34 PM »
@maz_phil  as @waltworks mentioned, HELOCs are not as easy to find on rental properties as they are your primary residence.  BUT they are out there.

National banks that perform LOC on investment properties that I've personally worked with over the last 12mo...

Huntington (huntington.com) - 80% LTV, paying approx. 7%

NFCU (navyfederal.org) - 80% LTV, paying approx. 6.5%

PenFed (penfed.org) - 80% LTV, I didn't follow through with the LOC but rates run prime +1%.

Your credit unions will probably offer something more competitive with less underwriting - call them and ask to speak with the commercial lending department. I'm seeing 80% LTV at PRIME in Texas.

Some HELOCs have been only drive by appraisals, which range pretty true to Zillow and others have been a full appraisal.  But it's a very cheap and effective way to get funds.

JDsNova

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Re: Home Equity Line of Credit & Other Financing
« Reply #3 on: November 29, 2018, 05:29:10 PM »
To slightly hijack the thread....

I’m planning to spend about $40k on concrete work at my primary residence.  I have the cash, but is there any benefit in getting a HELOC or home equity loan (primary residence).  The interest rates don’t appear to be that appealing. 

Thx


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sammybiker

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Re: Home Equity Line of Credit & Other Financing
« Reply #4 on: November 29, 2018, 06:27:12 PM »
@JDsNova   I saw about the same rates however the HELOC has far less fees (usually no cost or very low cost to establish) vs the home equity loan, which was closer to setting up a new mortgage.  In comparison, the HELOC was more similar to opening a new credit card.

A HELOC to me is favorable in all cases...I really can't see where a home equity loan would be preferred.  I guess if you don't manage your money well and need to be forced to repay principal + interest every month (where as HELOCs are typically interest only).