Hi everyone

I am trying to pull a HELOC on my house to expand my rental portfolio (currently 1 triplex). I have been told about this interest only loan option and after reading several articles I am just not sure I really understand the pros and cons and what my risks are. It seems like people who utilize it are hedging on significant appreciation in the property so that at the end of the loan they can refinance and pay the loan back?

also, how would I calculate my cap rate if I take a HELOC out on the downpayment

thanks

Is the heloc for the down pmt or the complete purchase? Just because the bank lets you only pay interest doesn't mean you can't or shouldn't pay principal. Just make your own amort schedule for how long you think it will take you to pay it off or use the term of the loan. Most helocs mature after 15 to 20 years. I typically don't use my heloc for long term financing.

Hi Craig,

It would be for the down payment. The maturation of the loan is 10 years.

Originally posted by @Derek Cheng :

Hi Craig,

It would be for the down payment. The maturation of the loan is 10 years.

Then I would calculate a monthly pmt based on a 10 year loan for a roi calc. Cap rate is calculated as if there is no pmt on the purchase.

@Derek Cheng I know some banks will structure a HELOC so you have a 10 year draw period where they only require interest payments and then a 15 repayment period, which more or less means whatever hasn't been payed becomes a traditional loan that is amortized over the 15 years.