Author Topic: Can you get a home equity loan on a property valued under $50,000?  (Read 3014 times)

anonymouscow

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So, I know banks do not typically give loans for under 50k.

Would it be possible to pay cash for a 50k property and then take out a home equity loan thus freeing up money to buy another property in cash? Will the bank do a equity loan on a property valued under 50k?

Why will banks do an equity loan for 25k, but not a home loan for 50k?

gardeningandgreen

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Re: Can you get a home equity loan on a property valued under $50,000?
« Reply #1 on: May 24, 2017, 12:16:05 PM »
You may be able to get an equity loan depending on the state of the property. Most banks will have a minimum of $25k. The problem that most people run into with a property valued at $50k is that it can have tons of problems. For example if the appraiser finds a problem with the house that will make the property value go down over the short term(a bad roof or foundation issues) the bank will not do the loan until the problem is fixed. Basically the bank doesn't want to risk a house falling into disrepair when they have an interest in it.

Aunt Petunia

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Re: Can you get a home equity loan on a property valued under $50,000?
« Reply #2 on: May 24, 2017, 12:22:52 PM »
My first home cost $45k and I had no problem getting a loan. There were lots of properties in the area in that price range though. Try a local bank or credit union.

Bobberth

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Re: Can you get a home equity loan on a property valued under $50,000?
« Reply #3 on: May 24, 2017, 02:50:40 PM »
Because of the costs involved, most banks prefer 100k+ loans and a few will go down to 50k. I have 11 properties (9 houses 2 duplexes) and the most I have paid to acquire one was $48k. I do have a commercial LOC on 7 of the houses and commercial 5 year balloon notes on the duplexes. My issue has been terrible comps. The bank just looks at MLS listings. It doesn't care if I bought a $35k house and then replaced the stolen water lines and furnace to make the house actually livable if there is another property listed for $35k that is uninhabitable because of missing water lines and a furnace. The bank uses $35k. 

All of my loans are through a local bank. A co-worker had a contact with a commercial lender that gave me an in. Not sure if they would mess with my small size if it wasn't for that connection but it's worth a shot to ask. I think it helped the banks 'numbers' because I was investing within city limits with an 'economically depressed' designation. Don't expect any of the large banks to go that low in size. Also, you won't get the best rates. I'm at 5.5%.

Drifterrider

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Re: Can you get a home equity loan on a property valued under $50,000?
« Reply #4 on: May 25, 2017, 09:52:41 AM »
So, I know banks do not typically give loans for under 50k.

Would it be possible to pay cash for a 50k property and then take out a home equity loan thus freeing up money to buy another property in cash? Will the bank do a equity loan on a property valued under 50k?

Why will banks do an equity loan for 25k, but not a home loan for 50k?

I was shopping last year and had little problem securing a first mortgage 30 year loan for less than $50K.  The lowest I looked for was a sales price of $35K with me putting down 35%.  Because of the reasonably fixed closing cost, a lower loan shows as having a higher percentage of closing cost and according to two lenders, requires the lender to complete much more federal paperwork (think of the aftermath of the housing meltdown and all the "liar loans" that went into default).

Why would you pay cash then borrow it back?  Put 50% down and take a short term loan for the balance (yes you can find a 10 year mortgage).  With that much of a down payment you will probably find it easy to secure a loan.

anonymouscow

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Re: Can you get a home equity loan on a property valued under $50,000?
« Reply #5 on: May 26, 2017, 09:22:23 AM »
So, I know banks do not typically give loans for under 50k.

Would it be possible to pay cash for a 50k property and then take out a home equity loan thus freeing up money to buy another property in cash? Will the bank do a equity loan on a property valued under 50k?

Why will banks do an equity loan for 25k, but not a home loan for 50k?

I was shopping last year and had little problem securing a first mortgage 30 year loan for less than $50K.  The lowest I looked for was a sales price of $35K with me putting down 35%.  Because of the reasonably fixed closing cost, a lower loan shows as having a higher percentage of closing cost and according to two lenders, requires the lender to complete much more federal paperwork (think of the aftermath of the housing meltdown and all the "liar loans" that went into default).

Why would you pay cash then borrow it back?  Put 50% down and take a short term loan for the balance (yes you can find a 10 year mortgage).  With that much of a down payment you will probably find it easy to secure a loan.

I already started the deal saying I would pay cash. It's for an investment property. My DTI is 46% so I probably do not qualify for an equity loan anyway. A 25k home equity loan seems more commonplace than a sub-50k primary mortgage, I thought it would be an easier task.

gardeningandgreen

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Re: Can you get a home equity loan on a property valued under $50,000?
« Reply #6 on: May 26, 2017, 09:44:48 AM »
So, I know banks do not typically give loans for under 50k.

Would it be possible to pay cash for a 50k property and then take out a home equity loan thus freeing up money to buy another property in cash? Will the bank do a equity loan on a property valued under 50k?

Why will banks do an equity loan for 25k, but not a home loan for 50k?

I was shopping last year and had little problem securing a first mortgage 30 year loan for less than $50K.  The lowest I looked for was a sales price of $35K with me putting down 35%.  Because of the reasonably fixed closing cost, a lower loan shows as having a higher percentage of closing cost and according to two lenders, requires the lender to complete much more federal paperwork (think of the aftermath of the housing meltdown and all the "liar loans" that went into default).

Why would you pay cash then borrow it back?  Put 50% down and take a short term loan for the balance (yes you can find a 10 year mortgage).  With that much of a down payment you will probably find it easy to secure a loan.

I already started the deal saying I would pay cash. It's for an investment property. My DTI is 46% so I probably do not qualify for an equity loan anyway. A 25k home equity loan seems more commonplace than a sub-50k primary mortgage, I thought it would be an easier task.

If your DTI is 46% you most likely will not qualify for any loan. The best option is to pay down some debt now and once that is taken care of look at doing an equity loan. Also finding a business banker might be a good option. If you have a formal business set up they may be able to look at business assets and not use your personal income and credit score.

CareCPA

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Re: Can you get a home equity loan on a property valued under $50,000?
« Reply #7 on: May 26, 2017, 10:00:24 AM »
Not sure if this is 100% helpful:
We purchased a house the other year in cash, then did renovations out of pocket, and were all in at $55k. We were able to get a loan for $25k afterwards to cash out (I didn't ask for more or less, so I don't know if both directions were feasible).
The rub: it's only a 7-year loan. There were different lengths, but I don't remember all the options. If I can dig them up I'll post them here for reference. I know none of them were for a full 30-year, I think 15 was the longest.

anonymouscow

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Re: Can you get a home equity loan on a property valued under $50,000?
« Reply #8 on: May 26, 2017, 10:57:03 AM »
So, I know banks do not typically give loans for under 50k.

Would it be possible to pay cash for a 50k property and then take out a home equity loan thus freeing up money to buy another property in cash? Will the bank do a equity loan on a property valued under 50k?

Why will banks do an equity loan for 25k, but not a home loan for 50k?

I was shopping last year and had little problem securing a first mortgage 30 year loan for less than $50K.  The lowest I looked for was a sales price of $35K with me putting down 35%.  Because of the reasonably fixed closing cost, a lower loan shows as having a higher percentage of closing cost and according to two lenders, requires the lender to complete much more federal paperwork (think of the aftermath of the housing meltdown and all the "liar loans" that went into default).

Why would you pay cash then borrow it back?  Put 50% down and take a short term loan for the balance (yes you can find a 10 year mortgage).  With that much of a down payment you will probably find it easy to secure a loan.

I already started the deal saying I would pay cash. It's for an investment property. My DTI is 46% so I probably do not qualify for an equity loan anyway. A 25k home equity loan seems more commonplace than a sub-50k primary mortgage, I thought it would be an easier task.

If your DTI is 46% you most likely will not qualify for any loan. The best option is to pay down some debt now and once that is taken care of look at doing an equity loan. Also finding a business banker might be a good option. If you have a formal business set up they may be able to look at business assets and not use your personal income and credit score.

The problem is I am the co-borrower on a 15 year mortgage, I am the one who makes less money so I can't put much more extra toward the payments.

I am not sure I can convince my spouse to take out a loan with me for an investment property. Combined our DTI is 16%. She is far more risk adverse than I am. Because I make so much less than her a few hundred dollars one way or the other is a much bigger deal to me.

gardeningandgreen

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Re: Can you get a home equity loan on a property valued under $50,000?
« Reply #9 on: May 26, 2017, 11:12:57 AM »
So, I know banks do not typically give loans for under 50k.

Would it be possible to pay cash for a 50k property and then take out a home equity loan thus freeing up money to buy another property in cash? Will the bank do a equity loan on a property valued under 50k?

Why will banks do an equity loan for 25k, but not a home loan for 50k?

I was shopping last year and had little problem securing a first mortgage 30 year loan for less than $50K.  The lowest I looked for was a sales price of $35K with me putting down 35%.  Because of the reasonably fixed closing cost, a lower loan shows as having a higher percentage of closing cost and according to two lenders, requires the lender to complete much more federal paperwork (think of the aftermath of the housing meltdown and all the "liar loans" that went into default).

Why would you pay cash then borrow it back?  Put 50% down and take a short term loan for the balance (yes you can find a 10 year mortgage).  With that much of a down payment you will probably find it easy to secure a loan.

I already started the deal saying I would pay cash. It's for an investment property. My DTI is 46% so I probably do not qualify for an equity loan anyway. A 25k home equity loan seems more commonplace than a sub-50k primary mortgage, I thought it would be an easier task.

If your DTI is 46% you most likely will not qualify for any loan. The best option is to pay down some debt now and once that is taken care of look at doing an equity loan. Also finding a business banker might be a good option. If you have a formal business set up they may be able to look at business assets and not use your personal income and credit score.

The problem is I am the co-borrower on a 15 year mortgage, I am the one who makes less money so I can't put much more extra toward the payments.

I am not sure I can convince my spouse to take out a loan with me for an investment property. Combined our DTI is 16%. She is far more risk adverse than I am. Because I make so much less than her a few hundred dollars one way or the other is a much bigger deal to me.

Will the new investment property be making a decent income? If so that can move the needle on your DTI pretty quickly. If like you said a few hundred dollars a month makes a difference the income from the property will be considered for the loan. This would be a great reason to buy the property with cash get it cash flow positive and then get the cash out loan. Just make sure you don't set it up as a business that writes off everything on taxes and makes it look like you are loosing money to the government. This will also make it look like you are loosing money to the bank.

anonymouscow

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Re: Can you get a home equity loan on a property valued under $50,000?
« Reply #10 on: June 03, 2017, 09:14:09 AM »
Quote
Will the new investment property be making a decent income? If so that can move the needle on your DTI pretty quickly. If like you said a few hundred dollars a month makes a difference the income from the property will be considered for the loan. This would be a great reason to buy the property with cash get it cash flow positive and then get the cash out loan. Just make sure you don't set it up as a business that writes off everything on taxes and makes it look like you are loosing money to the government. This will also make it look like you are loosing money to the bank.

If i am calculating things correctly the additional income will only make a 3% difference (46% DTI to 43% DTI). This is counting the tax/insurance as an expense and 75% of the rent as income. My bank also told me they require two years of rental income before they count it.

The girlfriend says she is not keen on putting money into an investment unless the house is paid off.

I can either try and pay down the mortgage or use my retirement funds and take the penalty.