How do you pull out equity on your home after its appreciated?

Real Estate Broker · Atlanta, GA · Member since 2015 · 32 posts · 10 votes

Hi all, I have a SFR valued at around 215k. The original loan was for 170k and I currently owe 140k. What’s the best strategy to pull out the equity to buy another property based off the new value? Traditional banks I’ve spoken with will only give me a cash out refi based off the original loan amount and money I owe now.

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Ann Rosen

Member since 2018 · 44 posts · 15 votes

Do not order an appraisal because most lenders have their own appraisal companies and you will be paying for two appraisals. Is the property in Atlanta?

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Nick Fitzpatrick
Real Estate Broker · Marietta, GA · Member since 2014 · 135 posts · 105 votes
8y
@Greg Davis HELOC should be easier to get. BUT, when you go to get a loan on a new property you may get push back if they see you are cross-collateralizing. I have a guy at a local CU that should be able to help.
1 Reply
Sunny Shakhawala
Parsippany, NJ · Member since 2016 · 64 posts · 49 votes
8y
@Greg Davis Whats ur current interest rate and term? Youd have to see what a refi would do to your payment (current and long term) I suggest an interest only heloc. Last option is to sell if you can avoid cap gains or 1031.
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Greg Davis
OP
Real Estate Broker · Atlanta, GA · Member since 2015 · 32 posts · 10 votes
8y
@Vik P. The one I was talking about is a rental, but I could do it with my primary as well if thats a better option. Thank you for the great advice though. I’m going to start making a list too and see if I can find a special promo.
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Greg Davis
OP
Real Estate Broker · Atlanta, GA · Member since 2015 · 32 posts · 10 votes
8y
@Dave Lawrence Awesome, thank you Dave. Going to check them out this week!
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Greg Davis
OP
Real Estate Broker · Atlanta, GA · Member since 2015 · 32 posts · 10 votes
8y
@Nick Fitzpatrick Sounds great Nick. I appreciate it!
0 Reply
Vik P.
Investor · Camas, WA · Member since 2015 · 82 posts · 56 votes
8y
Originally posted by @Greg Davis:
@Vik P.
The one I was talking about is a rental, but I could do it with my primary as well if thats a better option. Thank you for the great advice though. I’m going to start making a list too and see if I can find a special promo.
Check out penfed.org along with local CUs. They have a onetime $65 r something fee ro be a member (if you arent already). They do HELOCs upto 80% LTV on rentals and upto 90% on primary residence (will need a full appraisal for anything over 80%) and I believe they cover al 50 states or close to it if not every single one. good luck
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Sam Shueh
Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
8y
HELOC often at 80% of residual value. No need to order your own it will not count.
Lenders order their own. For HELOC is often a drive by exterior.
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Greg Davis
OP
Real Estate Broker · Atlanta, GA · Member since 2015 · 32 posts · 10 votes
8y
@Sunny Shakhawala Thanks Sunny I’ll look into that. It’s 3.75 and 30 yr. I can still positive cash flow with a higher interest rate so I don’t want to 1031 though.
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Greg Davis
OP
Real Estate Broker · Atlanta, GA · Member since 2015 · 32 posts · 10 votes
8y
@Vik P. I really appreciate it man. Sounds like several investors say this is the CU to go with. Good luck to you as well!
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Tristan Colborg
Real Estate Broker · Commerce City, CO · Member since 2018 · 107 posts · 55 votes
8y
I personally like the HELOC option more than the cash out refi. It let's you tap into the equity of the property and have it available to use when you want it. If you have no use for it, then it sits there and you are not making payments on it. Then when you have something you want to use it on you can, and then only pay on what you have used. The only downside to the HELOC is that many of them have a 1% minimum payment on the balance used until you are out of the draw period. So if you use $80k of it your payment is $800. Where as on a 15 year amortized payment it would be just over $600. Still I think it's good to just have the funds available for when you want them.
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Peter StewartBusiness Member
Real Estate Broker · Indianapolis, IN · Member since 2018 · 160 posts · 168 votes
8y
Wells Fargo also does non-owner occ HELOC's. 70% LTV. I've got them in place on two properties I own.
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Stan Shlyapochnik
Lender · Chicago, IL · Member since 2018 · 2 posts · 0 votes
8y
@Greg Davis How Our Machine Works is by Utilixing Our existing Credit Facilities You can participate On Our Platform to retain the equity: W-ZERO FEES
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Cristian Aviles-Morales
Orlando, FL · Member since 2016 · 92 posts · 36 votes
8y
@Tristan Colborg What is the draw period if you dont me asking? And its 1% of 80k until the 80k is repaid or is that what the period is and itll change after the draw period ends?
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Vik P.
Investor · Camas, WA · Member since 2015 · 82 posts · 56 votes
8y
Originally posted by @Greg Davis:
@Vik P.
I really appreciate it man. Sounds like several investors say this is the CU to go with. Good luck to you as well!
Thanks. The only thing I dont know is whether penfed heloc or any of the offerings these days have IO option for a rental HELOC (or for primary for that matter) during the draw period as many of them have 1 or 1.5% as min payment. May be someone here can weigh in on that.
IO is the one I like :D
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Tristan Colborg
Real Estate Broker · Commerce City, CO · Member since 2018 · 107 posts · 55 votes
8y
@Cristian Aviles-Morales So all Helocs have a draw period and a repayment period. How long each of those are depends on the bank. Mine with Navy Federal for example has a 20 year draw period and 20 year repayment period. During the draw period you are paying 1% of whatever your balance is and it is lowering your principal and interest with each payment. At the and of your draw period the remaining balance gets amortized over the amortization period. So if you started with 80k during the draw period and had a remaining balance of 50k at the end, the 50k would be amortized over that period. So in my case the 50k would be over 20 year period, and the payments are based off that 20 year period not the 1% any more. Hopefully that makes sense.
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Chris Garcia
Helotes, TX · Member since 2016 · 6 posts · 3 votes
8y
@Tristan Colborg great info! I was wondering if you actually needed to be offIlated with the armed forces past or present in order to do biz with Navy Federal?
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Tristan Colborg
Real Estate Broker · Commerce City, CO · Member since 2018 · 107 posts · 55 votes
8y
@Chris Garcia Yes you have to have ties to the military to join. It could be parents, grandparents, siblings, etc.
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Doug Orchard
Specialist · Tacoma, WA · Member since 2016 · 73 posts · 30 votes
8y
@Greg Daviswhats a Smyrna?
0 Reply
Cristian Aviles-Morales
Orlando, FL · Member since 2016 · 92 posts · 36 votes
8y
Originally posted by @Tristan Colborg:
@Cristian Aviles-Morales So all Helocs have a draw period and a repayment period. How long each of those are depends on the bank. Mine with Navy Federal for example has a 20 year draw period and 20 year repayment period. During the draw period you are paying 1% of whatever your balance is and it is lowering your principal and interest with each payment. At the and of your draw period the remaining balance gets amortized over the amortization period. So if you started with 80k during the draw period and had a remaining balance of 50k at the end, the 50k would be amortized over that period. So in my case the 50k would be over 20 year period, and the payments are based off that 20 year period not the 1% any more. Hopefully that makes sense.
Perfect! I have Navy Federal too so that's handy to know they offer this service!
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Sandor Bogdan
Investor · Sherman Oaks, CA · Member since 2016 · 10 posts · 3 votes
8y
One more thing to consider with a HELOC that could have effect on the deal you are trying to use it for. It can negatively effect the debt to income ratio for the next deal. Let's say you can get one at a 5% rate now and use it for a down payment for a new deal. The lender for this new deal will use a much higher rate when calculating the monthly payments you would have to make on the HELOC. It is a variable rate and to be safe they have a ceiling that they default to. I believe when I was dealing with this it was 14% but this was a few years ago. Things might have changed since. Naturally this is not an issue with a cash out refi.
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Greg Davis
OP
Real Estate Broker · Atlanta, GA · Member since 2015 · 32 posts · 10 votes
8y
@Doug Orchard Smyrna, Georgia*. My primary residence is there.
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Greg Davis
OP
Real Estate Broker · Atlanta, GA · Member since 2015 · 32 posts · 10 votes
8y
@Sandor Bogdan Good call! I definitely didn’t think of that of it affecting the debt to income ratio.
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Roger Laughary
Rental Property Investor · Wichita, KS · Member since 2015 · 83 posts · 45 votes
8y
Some CU's do better LTV's for HELOC's fyi, depending on county tax appraisal. If you have a high tax appraisal, you can get more and not have to pay an appraiser fee. Best option for cash flow would be the 30 year refi-cash out at around 75-80% LTV, unless it's a short-term equity need.
1 Reply
Israel Torres
Rental Property Investor · Chicago, IL · Member since 2017 · 40 posts · 54 votes
8y
Hi Greg,
I have come across this in the past as well. There are banks I have used that do not require seasoning of 2 years with appreciation. Wells Fargo, Guaranteed Rate, Reliance First...are some that come to mind. Good luck!
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Thomas Ferreira Jr.
Member since 2018 · 24 posts · 3 votes
8y
Try penfed. They have been awesome for me.
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