Rio Hondo Tx · Member since 2017 · 4 posts · 0 votes
Hi there
I have primary residence that I would like to access its equity to begin my first RE investment. I have came across HELOCs and HELoans but not sure which would benefit me best?
I am leaning towards the BRRRR method or traditional LR once the right property comes across.
I have researched both but still not sure which of those 2 would benefit me best or if it even matters.
Just would like tips on this topic if anyone has any?
Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
2y
HELOC is best for short term money, because the interest rates are adjustable, while the second mortgage is a fixed rate for a period of time. I like them for an emergency fund, if I have over-runs with a renovation. I prefer this to using one for a down payment. Impossible to tell which would benefit you most.
I have found that lenders value the house in different ways; one is a full appraisal and the other is an automatic valuation…my credit union did a "drive by" valuation. Figure offers a quick HELOC, which we thought we'd get…but our DTI (debt to income) was too high. We also used PenFed for a HELOC, and that went well.
Tips: pull your own FICO score and call the local community banks and credit unions near you and ask what rates and terms they offer with a FICO like yours. Make a table and compare, as interest rates and years of fixed vs variable rates will be all over the place. Navy Federal has the longest draw and pay back period I have seen, whereas my local credit union has a very short draw/repayment period.
Figure out what works best for your own situation.
Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
2y
HELOC is best for short term money, because the interest rates are adjustable, while the second mortgage is a fixed rate for a period of time. I like them for an emergency fund, if I have over-runs with a renovation. I prefer this to using one for a down payment. Impossible to tell which would benefit you most.
I have found that lenders value the house in different ways; one is a full appraisal and the other is an automatic valuation…my credit union did a "drive by" valuation. Figure offers a quick HELOC, which we thought we'd get…but our DTI (debt to income) was too high. We also used PenFed for a HELOC, and that went well.
Tips: pull your own FICO score and call the local community banks and credit unions near you and ask what rates and terms they offer with a FICO like yours. Make a table and compare, as interest rates and years of fixed vs variable rates will be all over the place. Navy Federal has the longest draw and pay back period I have seen, whereas my local credit union has a very short draw/repayment period.
Figure out what works best for your own situation.
HELOC is best for short term money, because the interest rates are adjustable, while the second mortgage is a fixed rate for a period of time. I like them for an emergency fund, if I have over-runs with a renovation. I prefer this to using one for a down payment. Impossible to tell which would benefit you most.
I have found that lenders value the house in different ways; one is a full appraisal and the other is an automatic valuation…my credit union did a "drive by" valuation. Figure offers a quick HELOC, which we thought we'd get…but our DTI (debt to income) was too high. We also used PenFed for a HELOC, and that went well.
Tips: pull your own FICO score and call the local community banks and credit unions near you and ask what rates and terms they offer with a FICO like yours. Make a table and compare, as interest rates and years of fixed vs variable rates will be all over the place. Navy Federal has the longest draw and pay back period I have seen, whereas my local credit union has a very short draw/repayment period.
Figure out what works best for your own situation.
How was your experience with Penfed? What terms did you end up getting? Do they have high fees? I was looking into them.
I have primary residence that I would like to access its equity to begin my first RE investment. I have came across HELOCs and HELoans but not sure which would benefit me best?
I am leaning towards the BRRRR method or traditional LR once the right property comes across.
I have researched both but still not sure which of those 2 would benefit me best or if it even matters.
Just would like tips on this topic if anyone has any?
Thanks
I took out a fixed rate HEloan on my primary back in mid 2022 to do a garage-conversion ADU. I decided to go with a fixed rate HEloan over a HELOC because at the time, interest rates were rising and I knew that the rents can more than cover the fixed payments. I ended up locking in a 6% fixed rate and I'm glad I did because my interest rate would have doubled if I went with a HELOC. But just as Kerry mentioned, HELOC should be used as a short term loan due to variable interest rates. So be sure to have a clear exit strategy.