Author Topic: HELOC vs Commercial Mortgage  (Read 129 times)

justchecking

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HELOC vs Commercial Mortgage
« on: June 25, 2020, 06:22:09 PM »
I have a questions about what kind of loan to get.

My brother and I started an LLC to purchase a single family home cash.  We fixed it up and have now rented it.  We did this in hopes of successfully completing the BRRR method and cashing out all of the equity and doing it all again.  We knew that I would have to lend the LLC money to do the repairs and when it was all said and done I loaned the LLC around 60K.  The small local bank we were hoping to go through for our mortgage has put the brakes on everything commercial right now.  They will not get back to me anymore because I have asked so many times.  I talked to another bank and they are willing to give us a 30yr HELOC on the property.  The HELOC would have a 4.5 interest rate and be for 30 years.  The commercial loan, if and when it would happen, would have a 6-8 percent interest on it and be amortized over 10 years with a balloon payment in 7 and we would just refinance then for the same 6-8 percent for another 7 years.  The rub of this is that the HELOC interest cannot be deducted for taxes and the commercial interest can.  Also, the commercial loan would not allow us to take out as much equity as the HELOC.  For argument's sake let's say these amount are 200,000 for the HELOC and 175,000 for the commercial loan.  My wife and I are still in the 22% tax bracket.  Which one of these makes sense to take?  HELOC or commercial?

justchecking

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Re: HELOC vs Commercial Mortgage
« Reply #1 on: June 25, 2020, 06:25:35 PM »
I also wanted to add that the 60,000 that is owed back to me from the LLC is a down payment for another rental property and it could be making me more money if it was out.