DSCR loan uses

Mortgage Brokers & Lenders
2yFollow

DSCR loan uses

Ismael Ayala Jr.
Investor · Hillsborough County · Member since 2024 · 30 posts · 15 votes

This maybe a silly question but I feel you got to put yourself out there and not be afraid to ask questions and admit your limitations. I'm new to real estate(just started renting out my rental property last fall). I understand real estate to be capital intensive. However, I'm looking at creative ways to produce cash flow with little to no cash down. The question is:

I have >$100,000 of equity in my (1st SFH) rental property. I currently live in my primary residence (2nd SFH). Will a DSCR lender give me a home equity loan from my (1st SFH) rental property, so that I can cover the down payment + closing costs to assume the 2.75% interest rate on a (3rd SFH) property I would move into immediately? As I would have to move in at least for a year to assume that rate. I would then just rent out my current (2nd SFH). The goal would be to capture that interest rate and keep it for the next 25 years so that I can cash flow well, if I move again and rent it out. And then payoff the home equity loan about less than $60,000 within 2-3 years.

Thx.

2Reply
19 views

Most Popular Reply

Robin SimonBusiness Member
Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
2y
Quote from @Ismael Ayala Jr.:

This maybe a silly question but I feel you got to put yourself out there and not be afraid to ask questions and admit your limitations. I'm new to real estate(just started renting out my rental property last fall). I understand real estate to be capital intensive. However, I'm looking at creative ways to produce cash flow with little to no cash down. The question is:

I have >$100,000 of equity in my (1st SFH) rental property. I currently live in my primary residence (2nd SFH). Will a DSCR lender give me a home equity loan from my (1st SFH) rental property, so that I can cover the down payment + closing costs to assume the 2.75% interest rate on a (3rd SFH) property I would move into immediately? As I would have to move in at least for a year to assume that rate. I would then just rent out my current (2nd SFH). The goal would be to capture that interest rate and keep it for the next 25 years so that I can cash flow well, if I move again and rent it out. And then payoff the home equity loan about less than $60,000 within 2-3 years.

Thx.


DSCR Loans are going to be strictly business-purpose 1st lien loans - so something like this with a closed end second or HELOC is going to be a different product entirely. Your situation is probably better for seeking out "Non-QM Lenders" or potentially other "Creative Financing" options

[email protected]
Harpoon Capital514 Reviews
WebsiteView Page
9Reply
See this reply in the discussion

3 Replies

Jump to latestLatest
  • Ko KashiwagiPro Member
    Lender · Los Angeles, CA · Member since 2022 · 967 posts · 445 votes
    2y

    Hi Ismael,

    You can get a HELOC on the 2nd SFH (your PRIMARY) assuming you qualify and there's equity to pull. Line of credit is usually on your primary not on the investment property. You could get a DSCR financing on the 1st rental property you have to come up with funds.

    310-848-9776
    0Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    2y
    Quote from @Ko Kashiwagi:

    Hi Ismael,

    You can get a HELOC on the 2nd SFH (your PRIMARY) assuming you qualify and there's equity to pull. Line of credit is usually on your primary not on the investment property. You could get a DSCR financing on the 1st rental property you have to come up with funds.


    I would be careful here if you are using cash out proceeds from a DSCR loan to purchase a primary residence. Many lenders require the funds to be used for business purpose. Using the funds to buy a primary will be considered consumer purpose. This could kill the deal.

    The HELOC on your current primary would work in this scenario if the goal is to buy another primary, especially if you only need $60k and will need to repay in 2-3 years. Many lenders offer competitive introductory rates, so if the goal is to pay off ASAP you will benefit from this.

    You could get a DSCR closed end second on your rental property but not a HELOC. The funds must be used for business purpose. Also be aware that there are prepayment penalties on these loans so you would need to keep it for 3-5 years unless you decrease the period which will result in a higher rate

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
    WebsiteView Page
    2Reply
  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    2y
    Quote from @Ismael Ayala Jr.:

    This maybe a silly question but I feel you got to put yourself out there and not be afraid to ask questions and admit your limitations. I'm new to real estate(just started renting out my rental property last fall). I understand real estate to be capital intensive. However, I'm looking at creative ways to produce cash flow with little to no cash down. The question is:

    I have >$100,000 of equity in my (1st SFH) rental property. I currently live in my primary residence (2nd SFH). Will a DSCR lender give me a home equity loan from my (1st SFH) rental property, so that I can cover the down payment + closing costs to assume the 2.75% interest rate on a (3rd SFH) property I would move into immediately? As I would have to move in at least for a year to assume that rate. I would then just rent out my current (2nd SFH). The goal would be to capture that interest rate and keep it for the next 25 years so that I can cash flow well, if I move again and rent it out. And then payoff the home equity loan about less than $60,000 within 2-3 years.

    Thx.


    DSCR Loans are going to be strictly business-purpose 1st lien loans - so something like this with a closed end second or HELOC is going to be a different product entirely. Your situation is probably better for seeking out "Non-QM Lenders" or potentially other "Creative Financing" options

    [email protected]
    Harpoon Capital514 Reviews
    WebsiteView Page
    9Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free